Is the housing market slowing down? Here's what we know

In the recent property market, frustrated home-buyers have been hoping for less competition.

While they were able to get what they wanted, it does not imply that the properties currently on the market are any more affordable. That part has actually become worse.

More houses are now starting to be offered for sale that it should eventually tip the scales back in favor of buyers. However, we have yet to see proof that this will happen in the near future.

At first glance, the data seems to be at odds: home sales are declining while home prices are rising. However, it is a matter of supply and demand. With more expensive houses that are being placed on the market, people are less likely to buy.

1. The number of houses up for sale is increasing

During the recent housing bubble, the inventory of homes for sale has been steadily falling year over year as a result of demand outstripping supply. Though there had been low inventory in 2019, things only kept getting worse.

The inventory started moving in a different direction in May, and in the most recent week, active listings were up 13% from a year ago.

For purchasers, the increase in the supply of homes is excellent news. It should help balance the market by reducing home price increases and lengthening the time on the market because it shifts the trend and there are more properties available.

Part of the reason there are more listings is because more homeowners are choosing to sell, in addition to the high expenses driving potential purchasers out of the market. Last May 2022 saw the most added listings onto the market ever since June 2019.

Home prices are exhibiting a lot of sticking power. If home sellers can't receive the price they want, they're likely to decide not to list their property.

2. Additional price reductions 

If you've been looking at houses, you may have noticed price reductions, something we haven't seen in a while.

Homes were selling so swiftly and often in bidding battles for a while that sellers frequently received more than they asked for. However, as buyers are constrained by affordability issues and there is less buying competition, some sellers are choosing to cut prices.

In just one year spanning from May 2021 to 2022, there has been an increase in price reductions. For this year, reductions were applied to 10.5% of homes, whereas it was 6.2% last year.

But that does not imply that there would be a forced sale of any homes.

While the percentage of homes with price reductions has increased, the percentage for May 2022 is still lower than every May since 2017. Although less fiercely competitive than last year, it is still quite fierce.

3. Real estate firms are laying off employees

Real estate firms are announcing layoffs as housing market activity declines.

This week, Compass and Redfin both announced personnel reductions of roughly 10% and about 8%, respectively.

According to Redfin CEO Glenn Kelman, demand for the company's services in May was 17 percent lower than anticipated. The company isn't producing enough work to support personnel and agents.

Redfin's revenue problems, not the employees who were let go, were the cause of the most recent layoffs.

Compass will lay off 450 of its 4,500 employees because of the evident signals of slowing economic development.

4. Loan applications are declining

Fewer prospective homeowners are seeking loans as a result of the rise in mortgage rates.

According to the Mortgage Bankers Association, mortgage purchase applications for the week ending June 10 were down 16% from the same period last year.

Purchase applications are down compared to previous year, as continued inventory constraints and affordability issues have dampened demand, coinciding with the steep surge in mortgage rates.

Refinance activity has dried up, running more than 70% lower than last year, despite mortgage rates being well above 5 percent. Refinance activity was brisk while rates were at historic lows during the epidemic.

5. Less people are looking to buy a property

Fewer people appear to be looking to purchase a home at the moment because prices are so high and mortgage rates are continuously rising.

During the week ending on June 12, a Redfin index that measures the number of inquiries Redfin agents receive for property tours and other services related to home buying was down 14% year over year. This was the index's ninth straight week of falls.

If it weren't for the spike in mortgage rates, the housing market would still be in a boom right now. Home-buyer demand was still very robust as recently as February, but rates are really making it difficult. Going from 3% to nearly 6% almost instantly has scared a lot of people out of the market.

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