Hi! I’m Aziz. My newsletter contextualizes economic news using data visualization. These days I’m focusing on housing—hit reply and let me know what you think.

Activity in the housing market is typically like the weather—hottest in the spring and summer and coolest in the fall and winter.

But the pandemic threw off these well-established patterns. For those who need to buy a home and are worried they missed out this summer, some good news: the housing market is responding less to traditional seasonal patterns and more to mortgage rates.

If rates decline later this year, not only will financing be cheaper, but there may be more homes on the market than is typical outside of the spring/summer.

For home buyers, one of the most frustrating aspects of today’s market is that there is a minuscule inventory of homes to choose from. Would-be sellers don’t want to move and lose their low-rate mortgages, and absent this supply, prices remain high and selection low. This dynamic has stymied bearish forecasters who (reasonably) assumed soaring mortgage rates would crush demand—and prices.

Only about 20% of consumers think it is now a good time to buy a home—down from 70% on the eve of the pandemic. Consumers haven’t been so pessimistic about housing since the early 1980’s.

Not everyone can wait it out

Buyers today are more commonly baby boomers, who have built up substantial equity in their homes that they can roll forward into a new purchase. Many of these are cash buyers. Younger generations and those with less equity or cash are sitting on the sidelines, waiting for a better moment.

But many home buyers can’t afford to wait this dynamic out—those starting families and needing more space, for example.

Because the window for transactions is primarily open from April to September, these households may feel they face a tough choice—buy today, swallowing much higher financing costs and prices, or—hoping for better conditions in the future—defer a purchase for an entire year, until the 2024 home buying season.

There is a chance they may not have to wait that long.

It depends on interest rates

The housing market has been off-kilter since the pandemic. In 2020 a lot of the spring activity was pushed out to later in the year—new listings were higher than normal in September and October. In 2022, the surge in rates kept listings low for most of the year. But a brief respite led to listings surging back to normal levels in June, before they plummeted later in the summer as yields rose again.

High mortgage rates obliterated the 2023 spring/summer housing season. For now, inventory remains extremely low. There were 100,000 fewer homes listed in June than usual for this time of year (a 20% reduction).

But with inflation now cooling more decisively, mortgage rates have already declined by 50bp. If this continues, not only will buyers soon benefit from lower financing costs, but potentially more selection than is normally available outside the summer months.

Further reading

No homes for sale Jun 7 Read full story

Mortgage lock-ins: move it and lose it Jun 2 Read full story