Only 1% of U.S. Home Have Changed Owners Since the Start of the Year

U.S. home prices have managed to hold steady in 2023. But home sales figures are a different story.

Data from Redfin finds that only 1% of U.S. homes changed hands during the first half of 2023. That's the lowest share in at least a decade. But there's also a very good reason for this trend.

Higher mortgage rates make selling a less appealing prospect

Many buyers are willing to sign a mortgage today, even if it means getting stuck with a higher interest rate. But while buyers may be resigned to higher mortgage rates, a lot of sellers aren't willing to see their costs go up.

In 2020 and 2021, mortgage lenders were swamped with refinance requests when borrowing rates dropped to record lows. At this point, many homeowners have ultra-low mortgage rates that they don't want to give up. And also, a lot of homeowners who didn't refinance in 2020 or 2021 are looking at an uptick in rates if they were to list their properties and sign new mortgages now.

So all told, it's just not an appealing time to sell. And if homeowners aren't willing to sell, buyers won't have properties to purchase.

When will home listings pick up?

A decline in mortgage rates could lead to an uptick in property listings. The problem, though, is that we don't know when mortgage rates will drop to a notable degree.

In time, existing homeowners might learn to come to terms with today's borrowing rates. But prospective buyers may have to sit tight a bit longer and wait for that to happen.

Of course, there's one thing that might help solve the current housing inventory shortage -- new construction. Housing starts (a measure of new construction) were up 3.9% in July compared to June, according to data from the U.S. Census Bureau. And housing starts in July were up 5.9% on an annual basis.

But it's important to remember that housing starts are called that for a reason -- they're simply indicative of the beginning stages of new construction. It can take many months to not only construct a home, but go through the permitting and inspection process to make sure it's suitable for occupancy. To put it another way, many of the homes being started in July likely won't be available to purchase until 2024 at the earliest.

Still, all isn't lost on the real estate inventory front. It may be that homeowners are hesitant to sell and give up their current mortgage rates now. But in time, they might change their tune. And that, combined with more opportunities for new construction, could give buyers a lot more options.

Where does that leave buyers who want to become homeowners before the end of 2023? Unfortunately, buyers may need to sit tight and wait for a rise in inventory, or otherwise be willing to compromise on the properties they buy. But those who put off homeownership until inventory rises get the benefit of being able to save more for a down payment, so that's at least a plus.