Redfin’s buyer’s market is not bringing down US home prices

Last month, Redfin counted 58% more Americans trying to sell a home than buy one—the largest gap since it began tracking this in 2013. Yet the typical home sold for about $429,000, the 38th consecutive month of year-over-year price gains. The speaker’s explanation is that sellers outnumber buyers, but many owners can afford to wait rather than accept a lower price.

US Census Bureau data show four in 10 homeowners have no mortgage. Many others hold rates around 3% from 2021 and would face much costlier debt if they moved. The agency regulating Fannie Mae and Freddie Mac estimates that each percentage point between an owner’s rate and today’s rate cuts their odds of selling by about 18%. It attributes 1.7 million forgone sales between spring 2022 and the end of 2023 to this lock-in: higher rates directly reduced prices by a little over 3%, but the lost supply pushed them up nearly 6%.

Local supply helps explain why Austin is about 27% below its 2022 peak after adding 30% to its housing supply in about a decade, while Hartford, Connecticut, is more than 20% above that peak amid constrained supply. Builders are less able to wait: construction loans run close to 12%, finished unsold new homes are at their highest level since 2009, and 38% of builders cut prices this month. More than 70% of builder mortgage originations include rate buydowns; DR Horton had buyers at 4.9% this summer versus a market rate around six and a half. In the second quarter, the typical new home sold for about $25,000 less than an existing one. But Lanar CEO Stuart Miller said almost 50% of visitors in many markets cannot immediately qualify for a mortgage, while DR Horton CEO Paul Romanowski said he would preserve margins rather than push sales further.

The speaker argues that government measures often bolster buyers without freeing existing homes. A January 8th directive for Fannie Mae and Freddie Mac to buy $200 billion of mortgage bonds briefly helped bring the 30-year rate below 6%, before it returned to around 7%. A cited FHA buyer subsidy created about 17,000 first-time buyers in its first year, but gave typical FHA buyers about 6% more buying power and coincided with their paying about 2.5% more for the same homes. Property-tax caps reinforce staying put: the Lincoln Institute found comparable Coconut Grove, Miami, townhouses taxed around $4,000 and more than $14,000 annually, depending on whether they were bought in 2006 or 2023.

First-time buyers now account for just 21% of purchases, and their typical age is 40. Redfin estimates the typical mortgage would take 38% of household income. Nearly 40% of first-time buyers under 30 received a family gift or inheritance for a down payment; a Federal Reserve paper estimates parental help accounts for about 27% of young households’ homeownership. Meanwhile, more than one in 10 FHA loans are behind on payments, and about 813,000 borrowers have negative equity, up 44% in a year. The conclusion: policies and incentives protect existing owners while leaving new buyers dependent on family wealth or exposed to greater debt risk.