Homeowners don't want to give up their lower rate and buy a new home at today's elevated mortgage rates near 7%.
"Homeowners are quiet quitting the housing market," Redfin's chief economist said.
New home listings in April were down more than 20% from a year ago and homeowners are increasingly staying put with low mortgage rates locked in, rather than trying to secure a new home at a higher rates.
That's keeping inventory low and prices high — and sidelining would-be buyers looking to upgrade their homes.
Data from Realtor.com cited by Fortune showed that 392.016 homes were listed for sale in April, below the 497,844 from the same month in 2022, and even further from the 552,082 listed in April 2019.
As RedFin chief economist described the downturn last week on Twitter with a phrase that's been used in the labor market to describe employees doing minimal work: "Homeowners are quiet quitting the housing market."
Mortgage rates over the last decade have been historically low, and they were driven even lower by the massive stimulus campaign embarked on by the Federal Reserve during the pandemic. The average 30-year mortgage rate in 2021 was 2.96%, the lowest on record.
Now though, rates are back up and have more than doubled from pandemic-era lows, leaving many buyers who locked in lower rates in recent years reluctant to wade back into the market.
The decline in homeowners looking to upgrade has a dual impact, as each homeowner that postpones looking for a new house also signifies one less seller on the market.
It's worth noting however, as Fortune's Lance Lambert pointed out, there were 49.3% more homes available for sale — active listings — in April 2023 compared to April 2022 largely due higher mortgage rates causing homes to sit on the market for longer than usual, leading to accumulating inventory.
Still, compared to April 2019, active listings remain about 50% down.
The low number of available houses, at the same time, has pushed buyers who are in the market to snap up homes quickly. Redfin reported that nearly half of homes on the market sell within two weeks, and that share saw an unusual uptick in April.
In any case, still-high mortgage rates and elevated prices have kept affordability low. In March, the average mortgage payment for new applicants climbed 1.6% month-over-month, according to Mortgage Bankers Association data.
As a seasoned real estate market analyst with extensive expertise in housing trends and economic indicators, I can provide valuable insights into the dynamics discussed in the article by Phil Rosen dated May 8, 2023. My deep understanding of the real estate landscape is based on years of tracking market trends, analyzing data, and staying abreast of economic factors influencing the housing sector.
The central theme of the article revolves around the decline in new home listings, a phenomenon attributed to both tight inventory and the surge in mortgage rates. This is a critical development with far-reaching consequences for homeowners, potential buyers, and the overall housing market. Let's break down the key concepts used in the article:
New Home Listings Decline:
A significant drop of more than 20% in new home listings compared to the previous year.
Homeowners are reluctant to enter the market due to current elevated mortgage rates, leading to a decrease in available inventory.
Homeowners Holding onto Lower Rates:
Homeowners are opting to stay in their current homes to retain lower mortgage rates, which were historically low due to the Federal Reserve's stimulus efforts during the pandemic.
Impact on Inventory and Prices:
The reluctance of homeowners to sell and upgrade is contributing to low inventory levels and, subsequently, driving home prices higher.
Quantifying the Decline in Listings:
Realtor.com data shows a specific decrease in listings, with 392,016 homes listed in April 2023, compared to 497,844 in April 2022 and 552,082 in April 2019.
Market Downturn Described as "Homeowners Quietly Quitting":
The Redfin chief economist characterizes the situation on Twitter, drawing a parallel to a phrase used in the labor market to describe employees doing minimal work.
Impact of Mortgage Rate Changes:
Mortgage rates, which were historically low during the past decade, have more than doubled from pandemic-era lows, discouraging potential buyers from entering the market.
Increase in Active Listings but Overall Decline:
Despite a higher number of active listings in April 2023 compared to April 2022, there's still a 50% decline compared to April 2019, indicating a substantial reduction in overall housing inventory.
Affordability Challenges:
High mortgage rates and elevated home prices are cited as factors keeping affordability low, with a 1.6% month-over-month increase in average mortgage payments for new applicants in March.
These trends underscore the complex interplay of economic factors, homeowner decisions, and market dynamics shaping the current state of the real estate market. The article highlights the nuanced challenges faced by both homeowners and potential buyers, emphasizing the need for a comprehensive understanding of these factors in navigating the evolving landscape.
“Quiet quitting” in the workplace meant you just checked out and did the bare minimum. And quiet quitting in the housing market would be something similar. You do the bare minimum to keep housed. No going all in, throwing your time, energy, and money into a house.
Various factors can create a housing shortage. The current one is a result of: too few homes being built over decades; high mortgage rates making moving home unaffordable for homeowners; COVID-19 disruptions; and Wall Street investors buying up too many owner-occupied homes for rental.
The bottom line. Today's elevated mortgage rate environment isn't preferable for homebuyers, but it doesn't mean that you should refrain from acting, either. If you discover your dream home, can afford the interest rate, find an affordable house, or have an alternative to rent, it can be worth it for you now.
When the Federal Reserve raises interest rates, home buyers can't afford expensive houses, so the prices will start to drop. And the reverse is also true – when mortgage rates are low, buyers have more money to spend, so home prices will start to rise.
Homeowners are 'quiet quitting' the U.S. housing market
The unusually low new home listings in April, which traditionally is a peak time for houses to go on sale, has prompted several to economists to draw attention to homebuyers 'quiet quitting' the housing market.
Quiet quitting has a cost and it's big. The global economy is losing almost $9 trillion, according to analytics firm Gallup, equivalent to as much as 9% of the world's GDP. While that may look like a hefty price tag, it's good news in a way, the polling firm argues.
Retaining a loyal customer base is easier than attracting a new one, so by driving away your best customers, carrying too little stock has the potential to slow your business' growth, or even to shrink it. Frequently being unable to fulfill customer orders will also damage your reputation among potential customers.
Rising materials costs, supply chain issues and labor shortages stemming from COVID all negatively impacted housing inventory. But the problem existed long before the pandemic: Essentially, the U.S. has failed to keep up with the housing demands of a continually increasing population.
High interest rates and low inventory are contributing to this issue, as is the growing number of millennials, who are looking for larger homes to raise families. For low-income Americans, the hunt for affordable housing can be especially tough.
Is it ever smart to put down less than 20 percent? For most homebuyers, a down payment of less than 20 percent will generally cost more money in the long run. But if saving up that kind of money will keep you from ever owning a home, it's worth considering.
As of Apr. 24, 2024, the average 30-year fixed mortgage rate is 7.51%, 20-year fixed mortgage rate is 7.39%, 15-year fixed mortgage rate is 6.88%, and 10-year fixed mortgage rate is 6.80%. Average rates for other loan types include 7.26% for an FHA 30-year fixed mortgage and 7.20% for a jumbo 30-year fixed mortgage.
The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have cooled a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.
Ideally, you'll be able to buy when both interest rates and home prices are low. If that's not possible, calculate both the short- and long-term costs of a lower interest rate versus a lower purchase price.
Despite mortgage rates remaining stubbornly high, most housing market experts expect them to recede over 2024, assuming the Federal Reserve acts on its signaled interest rate cuts. However, whether mortgage rates fade enough to create a meaningful shift in home affordability remains uncertain.
Practicing quiet quitting may lead to a loss of confidence in one's abilities and career trajectory. Employees who do not take pride in their work and do not feel fulfilled by their accomplishments may become disenchanted with their careers, leading to decreased motivation and job satisfaction.
A drop in engagement can be a sign of quiet quitting
Disengagement can take various forms. Disengaged employees are quieter in team meetings, stop taking the initiative, don't participate in non-mandatory events, etc. They do the bare minimum required on their contract and don't bother going the extra mile.
Quiet refers to an absence of noise and uproar.Quite is to a certain or fairly significant extent or degree; fairly.Quit is to stop, to discontinue, or to leave.
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Introduction: My name is Duncan Muller, I am a enchanting, good, gentle, modern, tasty, nice, elegant person who loves writing and wants to share my knowledge and understanding with you.
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