Rising mortgage rates are leading to a sharp drop in home sales. Sellers now rush to sell before the market cools down.

According to Realtor.com, the supply of houses for sale increased by 9% last week in comparison with the previous year. This is the largest annual gain that Realtor.com has seen since 2017.

Real estate brokerage RedfinIt was also reported that listings went up nearly twice as fast during the four week period ending on May 15th.^{They did the same thing a year earlier.}

Redfin Chief Economist Daryl Fairweather said that “rising mortgage rates” has caused the housing industry to shift. Home sellers want to be able to find buyers before they are less popular.

Sellers are clearly seeing the market slowing down. The number of homes in the pipeline, which is a measurement of existing home contracts, fell nearly 4% between March and April. The National Association of Realtors reported that they had fallen just over 9% since April 2021. According to the National Association of Realtors, this index only measures closed contracts, which is a more timely indicator about buyers’ reaction to increased mortgage rates. This is the sixth consecutive month of declines in sales and it has been the slowest pace for almost a decade.

Sales of new homes in April were also measured using signed contracts. This was a drop that is much higher than the expected 16%. according to the U.S. Census.

The reason sales are falling is that mortgage rates have increased sharply over the past year. They rose the most in April and May. In comparison to the average 30-year fixed rate of 3% at the beginning of the year, it is now over 5%.

Lindsay Katz of Redfin, a Los Angeles real estate broker, said that there used to be 10 to 15 offers for many houses. “Now, I get between two and six offers to buy a house. A good house.

Katz helped Alexandra Stocker, her husband, sell their home. Already worried, the stockers began to worry about how suddenly the housing market would cool.

We talked about it a lot. Is this a mistake? Is this the wrong boat? What happens to everything in three months? Will we be kicking ourselves for not selling the house sooner this year? said Alexandra Stocker.

The pandemic saw home prices rise steadily for the first two year, but falling mortgage rates have largely offset these increases.

An example would be: If a buyer purchases a $300,000.00 home in May 2019 with 20% down and a 30-year fixed loan, they will get an average rate of 4.33%. A monthly principal and interest payment would equal $1,192. This house is 5% cheaper in 2020. But mortgage rates have fallen to 3.41% so that the monthly payment has dropped to $1119.

In 2021, only about $100 had been added to the monthly payments. This month, with prices up another 21%, and mortgage rates surging to around 5.5%, the monthly payment hit $1,991 – almost $800 a month more than it was in 2019.

Even though home sellers were the ones driving six months ago and are currently facing less competition from potential buyers, Redfin’s demand index measures home-buyers’ requests and was down 8.8% in the week ended May 15. This is the biggest decline since April 2020 when most home-buying activity was halted by the pandemic.

Katz said, “I had a meeting with sellers in February that were selling in June. It’s a different conversation in February than in June. Because the market is completely changing,”

Stockers were delighted to sell their home at the time they did. The Stockers are planning to move out of California, and build a new home in Washington.

Alexandra Stocker said, “We joke that we might get out of here. You know, just in the right time.” “I don’t think I would want to be waiting any longer.”