The summer real estate market continues to be one for the books as inventory issues continue to drive up listing prices, putting sellers in the driver’s seat and making homebuying as competitive as ever. 

And a new report explains just how challenging that inventory issue is.

There are nearly 40% fewer homes for sale now than there were before the pandemic started, as homeowners continue to hold onto their low mortgage rates, according to a Redfin report. 

During the four weeks ended June 11, home-for-sale inventory fell 6% nationwide, the largest decline in 13 months. New listings also fell, dropping 23% for the 10th month of double-digit declines. 

Redfin says the lack of inventory is due to a combination of less homebuilding and fluctuating mortgage rates, which fell to record lows during the pandemic and are now high enough that many homeowners are staying put. 

Since 2021, mortgage rates have more than doubled and are currently at 7%. 

“The record-low mortgage rates of 2020 and 2021 drove a homebuying boom, depleting inventory,” the report said. “When rates started going up in the beginning of 2022, many would-be sellers backed off, failing to fill the inventory hole. Elevated rates discourage homeowners who would prefer to hold onto a comparatively low rate from selling.”

Pending home sales were also down, dropping 17% from last year, the biggest decline in four months. Despite the drop, people are still buying, according to the report which found mortgage-purchase applications rose 8% from the previous week. 

The report says with mortgage rates unlikely to change in the next few months, new listings are expected to remain scarce. 

“The Fed’s indication that there are more rate hikes to come is not what homebuyers want to hear. It’s likely to keep mortgage rates elevated and may even push them up a bit,” said Redfin economics research lead Chen Zhao. “People who are sitting on the sidelines, waiting for mortgage rates to decline, should know that’s unlikely to happen in the foreseeable future. If a home that’s in your price range and has everything on your wish list hits the market, there’s no good reason to wait.”

Thirty-year mortgage rates fell to 6.71% for the week ending June 8, a slight drop from 6.79% the previous week, yet close to November’s highest rate. 

Mortgage applications increased 8% during the week ended June 9, but purchase applications were down 27% from a year earlier.

The lower rate brought the average monthly mortgage payment on a median-priced home to $2,640, down slightly from June’s record high, but up 8% from a year ago.

There’s no doubt homebuyer demand continues to rise. During the week ended June 10, Redfin found Google searches for “homes for sale” were up 15% from last month but down 10% from last year. 

In the four weeks ended June 11, active listings fell 6.3% from last year, marking the third consecutive annual decline and the biggest drop in more than a year. Meanwhile, new listings fell 23.3% from last year.  

The median asking price of a home rose 0.3% from 2022 to $398,475. Meanwhile, the median sale price fell for an eighth straight week to $381,169, down 1.1% from 2022, marking the smallest decline in more than three months.