Affordability challenges among prospective homebuyers has kept the housing market stagnant over the past five months, allowing a sizable backlog of home inventory to pile up, according to the latest Redfin report.
The nationwide growing supply of homes has also helped fuel growth for new listings of homes for sale. Redfin reports that for the four weeks ending on February 2, new listings of U.S. homes for sale rose 7.9% from last year.
That also marks the biggest increase of homes for sale since the end of last year.
Sellers continue to list their homes on the market despite a lack of sales, which has contributed to a growing pool of housing supply. According to Redfin’s data, the five-month backlog of housing inventory is up from 4.4 months a year earlier, reaching the highest level of inventory in six years, except the prior four week period.
Recent inventory growth has helped alleviate home prices to some extent with the typical home in the U.S. selling for 2% less than its listing price, marking the biggest discount in nearly two years.
However, Redfin’s data does not see that trend translating into increased home sales just yet. Pending sales have improved marginally from the previous month, but they’re still down 8.1% from last year. Essentially, prospective homebuyers remain sidelined due to ongoing affordability challenges.
In the earlier stages of the home buying process, Redfin’s Homebuyer Demand Index, which shows a measure of tours and other buying services from Redfin agents, increased slightly from the week prior, but remains near its lowest level since last spring.
The report points to several theories explaining why prospective homebuyers are holding off. Affordability issues remain an obvious reason, driven by stubbornly high home prices and mortgage rates.
Both have pushed the median monthly housing payment up to $2,784, growing 8.3% from last year — only $21 shy of the all-time high median housing payment.
But researchers found it worth noting that daily average mortgage rates recently dropped below 7% for the first time since mid-December, showing promise to prospective buyers in 2025.
The report also states that buyers are waiting because they don’t want to make a major purchase amid uncertain federal economic policy.
Thirdly, the report lists climate and weather conditions as having an effect. The snow and extreme cold across the Midwest, Northeast, and South that has kept many house hunters locked in throughout January.
However, Texas proves itself as the exception given recent data from Realtor.com that shows a new construction boom within the area.
