Today’s volatile housing market features lower than typical transaction volume, mortgage rates that are 300 basis points higher than one year ago, prices that have slowly begun to slide lower, and limited inventory of available homes.

A recent report from Northmarq suggests that these factors are restricting consumers’ ability to transition from renting to owning, which in turn, is supporting demand for single-family rentals.

After all, single-family built-to-rent communities compete with for-sale housing as much as they do with traditional apartments.

Mortgage rates are the primary culprit. After topping 7 percent late last year, 30-year mortgage rates have come down closer to 6.25 percent to 6.5 percent in recent months but remain twice as high as late-2021 levels. It has created a wait-and-see approach for buyers and sellers.

“This has caused some would-be buyers to be priced out of the market, while others remain on the sidelines hoping rates will retreat further before deciding to buy a home,” according to the report.

These elevated mortgage rates have thus restricted the number of available homes, as existing owners who locked in low mortgage rates are reluctant to list residences, knowing that they cannot replace the low mortgage rates they already have in place.

Home inventory available for purchase was just 2.9 months at the latest reading, despite a low volume of transactions. Homebuilders now have more than 7 months of supply, after inventory levels peaked last summer.

Existing home sales posted monthly declines for 12 consecutive months, according to the report, with the latest figures down more than 27 percent year over year.

Existing Homes’ Sales Prices, Apt Rents Fall in May

At $388,800, the median sales price in existing homes is down 2 percent from one year ago, while prices for new homes are down 8 percent at $420,800, Northmarq reported.

Meanwhile, for the first time in at least three years, reported that apartment rents in May fell year over year by .5% to $1,739.

“This is yet another sign that rental-driven inflation is likely behind us,” Danielle Hale, chief economist said in prepared remarks.

For new home sales, though inching higher at the beginning of 2023, the pace of new home sales had declined by 44 percent from peak to trough (second half of 2020 and today), causing homebuilders to scale back operations.