Housing had a ‘disappointing’ May as new listings drop
At a time when home sales should hit their peak, both buyers and sellers are backing off, “possibly foreshadowing slower sales in the second half of the year.”
June marks the midpoint of peak homebuying season, but what little momentum the market has seen appears to be slowing.
Both buyers and sellers pulled back in recent weeks as evidenced by declines in mortgage applications and pending home sales, fewer new listings and an increase in delistings, according to new data.
While mortgage rates dipped slightly this week, they remain volatile amid the ongoing conflict in the Middle East, and small movements are unlikely to counteract buyer "malaise," especially with consumer sentiment at all-time low.
New listings fall, bucking historical trends
New listings typically reach their highest levels in May and June, but that may not happen this year, Zillow's May market report suggests. The number of new listings fell nearly a percent from April to May, according to Zillow, and dropped 4.1% year-over-year.
On a weekly basis, Redfin reported that new listings dipped 1.3% between May 24 and May 31, which it said was one of the biggest weekly declines of the year so far.
The report attributed the decline in part to slowing buyer demand — pending home sales ticked down for a third consecutive week, Redfin said — and an increase in the typical mortgage payment. Zillow's report also found that monthly mortgage costs rose in May, but noted that they're down from a year ago, when mortgage rates were higher.
"May housing results were disappointing for those hanging on to hope of a stronger year for sales," Zillow Chief Economist Mischa Fisher said in the monthly report. "Inventory is rising, but weekly data suggests it could flatline in the next four weeks," Mischa added, "possibly foreshadowing slower sales in the second half of the year."
More sellers are exiting the market
The decline in new listings isn't the only sign of seller wariness. In a separate report, Redfin found that delistings rose this spring, increasing for two consecutive months and reaching 5.8% of all listings in April. Apart from a spike in delistings at the start of the pandemic in March 2020, that's tied with December 2025 for the highest share on record in at least a decade.
Why are sellers opting out? According to Redfin, several factors may be involved, including homes sitting on the market longer and inventory outpacing demand. That's left sellers with the options of cutting their price, letting their listing linger or pulling it off the market and trying again later.
Some sellers may also still have unrealistic pricing expectations, choosing to delist rather than cut their sale price, the report noted.
Mortgage rates dip, but applications lag
After climbing for two weeks, average 30-year mortgage rates fell to 6.48% this week, according to Freddie Mac. "With mortgage rates in the mid-6% range and income growth outpacing home price growth, housing affordability is marginally improving," Freddie Mac Chief Economist Sam Khater said — but the degree of improvement depends on the day as rates respond to geopolitical conditions.
Mortgage News Daily (MND), which uses different criteria to determine average rates, pegged the 30-year rate at 6.58% on June 4. That was down from the day prior, with the movement tied to news of increasing oil prices earlier in the week, followed by more hopeful news of negotiations to end the Iran war on Thursday morning, according to MND. The next big headline to impact bond markets and rates is likely to be tomorrow's employment report, MND said.
Even with rates in a fairly narrow range over the past few weeks, mortgage activity continued to fall. The Mortgage Bankers Association (MBA) reported that, on a seasonally adjusted basis, overall mortgage applications were down 2.5% for the week ending May 29. The unadjusted purchase index fell 14% week-over-week — the "slowest weekly pace since April," MBA VP and Deputy Chief Economist Joel Kan noted — but was up 7% compared to a year ago.