More home sellers are sitting out of the spring housing market

It might seem like a great time to list your home for sale. Buyers are flooding back into the market, mortgage rates have fallen off their recent highs, and there are still far too few homes for sale to meet demand. But potential sellers aren’t budging.

New listings continued to fall in March, according to Realtor.com, down 20% from the same month last year. That decline in new listings outpaced the 16% drop posted in February. New listings in March were nearly 30% below pre-pandemic levels.

The active inventory of homes for sale is, however, 60% higher than the start of last spring, but that is only because homes are taking longer to sell. Inventory is also half of what it was at the start of spring in 2019, before the pandemic caused an unprecedented run on housing.

Homes are now sitting on the market an average of 54 days, up from an average of 36 days at the start of last spring. Time on market was longer in all of the top 50 metropolitan markets, but the greatest increases were in Raleigh, North Carolina (up 42 days), Kansas City, Missouri (up 37 days), and Austin, Texas (up 37 days). 

“Amid fewer new choices on the market and still rising home prices, home shoppers have shown that they are very rate sensitive, only jumping back in the market when rates dip, and so what happens with rates this spring will likely play a strong role in determining whether the housing market bumps along or picks up speed this year,” said Danielle Hale, chief economist with Realtor.com.

Mortgage rates dropped slightly in early March, due to the stress on the banking system from multiple bank failures. They are now, however, moving higher again, although not quite as high as they were last fall. The average rate on the 30-year fixed is now 6.61%, according to Mortgage News Daily, just about 2 percentage points higher than it was a year ago.

At a recent open house in the suburbs of Cleveland, Ohio, house hunters Vince and Katie Berardi said they were concerned that the market is still overpriced. The sellers of the 3-bedroom home they were touring had just dropped the price from $450,000 to $350,000. It already had several offers on it.

“There’s not as much competition as there was,” said Katie Berardi, who is pregnant with the couple’s second child. “But if there’s a good one on the market, like it’s gone within a week.”

Home prices nationally were still higher to start this year than they were at the start of last year, but they have been falling for the past seven months, according to S&P Case-Shiller. In January, the last reading on that index, prices were lower in some of the local markets that had previously been among the hottest, like Seattle and San Francisco. Prices are now flat in Phoenix, another market where prices had been surging. Other markets, especially in the South, like Atlanta and Miami, are still seeing big price gains.

List prices in March, according to Realtor.com, were down in Austin and Las Vegas, two markets that were particularly popular with transplants in the first years of the pandemic.