Interest rates, inventory and listings: A look at summer housing market trends in Louisville

Right around Kentucky Derby time, Louisville realtor Neal Cox’s phone starts ringing with frequency. The summer home selling season arrives with more properties, and buyers, hitting the market.

Increasingly, those summer highs aren’t what they used to be.

“My phone was very quiet in May,” Cox, a broker with Judah Real Estate Group, told the Courier Journal. “2022 was the first year that I shrank rather than grew from the previous year. And this year that trend is continuing.”

The hallmarks of the last few years, from multiple offers on a home to properties selling over list price, are still present. Prices, too, are still rising.

But some heat has left the market, local real estate agents told the Courier Journal.

“We are still severely in a seller's market,” said Bonnie Mays, CEO and principal broker-owner of United Real Estate Louisville and Lexington. “The summer was certainly different than the previous three summers because of interest rates and inventory.”

Here are five takeaways from the summer housing market in the Louisville area and local real estate agent’s thoughts on what’s ahead.

Interest rates putting pressure on buyers, sellers

Interest rates on home mortgage loans hit a 22-year high in late August — at 7.23%.

Rates on a 30-year fixed mortgage have stayed above 6% since last September, rising as the Federal Reserve periodically hiked rates in an attempt to slow inflation. That’s more than double the sub-3% rate that existed from mid-2020 through much of 2021.

Homeowners who bought or refinanced their home when rates were low are now reluctant to list their house, further aggravating the housing supply shortage.

Buyers, meanwhile, find themselves with less purchasing power when rates are higher.

“Even more than the rate itself is the uncertainty behind the rate,” Cox said, noting he lost some buyers when rates climbed rapidly last year. “People will adjust to whatever the environment is if they know the rules. But when the rules are uncertain, people get a little gun-shy.”

Mays said she’s found her first-time homebuyers don’t get too hung up on the interest rate number, instead tending to focus on their potential monthly payment. That interest rate is top of mind for sellers, though, who aren’t eager to lose their low rate.

Affordability is a continued concern

Home prices continued to rise in the greater Louisville area this summer, though less steeply than they have in recent years.

As summer ended this year, the median home sales price ($260,500) was up 3.4% year-to-date through August, compared to 2022. While still rising, that figure is much less steep than the 2021 to 2022 year-to-date through August jump of nearly 13%.

The continued imbalance between home shoppers and available properties is keeping prices rising, even in the face of rising interest rates. Rising costs are pricing out those looking at the lower price ranges.

"Not only do we not have a lot of homes for sale, we really don't have enough starter homes for sale,” Cox said. “And that means that millennials are at prime home-buying age right now … and a lot of them can't afford a home because there's nothing in their price range or they're competing against the other 20 or 30 folks in their area that are wanting the same thing."

Mays is seeing a similar trend in her brokerage, which has about 500 agents with offices in Louisville and Lexington.

“In price ranges under $400,000, even down to $200,000, $250,000 — what is now a starter price range — those people got priced out of buying a home because the rates went up,” she said.

Summer wasn't as hot for home sales

The seasonal trend of a summer bump in home sales was still true this year in Louisville, though fewer homes sold than is typical.

Monthly home sales stayed below 1,500 in the greater Louisville area in summer 2023, down from a range of 1,600-2,000 seen in the prior five summers, data from the Greater Louisville Association of Realtors show.

That dip, unsurprisingly, is also reflected in the number of homes that hit the market. In 2018-2022, the summer months brought 2,000-2,500 new “for sale” signs. This year? Listings didn’t crack 2,000.

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Cox said he saw less of the “want to move” crowd that would classically enter the market in the warmer months and more of the “need to move” buyers.

Mays said home sales at her brokerage this year are down about 15%, year-to-date, compared to last year. That’s in line with a year-to-date home sales dip of 18.4%, through August, in the Louisville region and 15.3% nationally.

She said the lack of inventory has pushed her motivated buyers to search year-round for a new home, not just when it may be more convenient in the summertime.

“The last few years, buyers who really want to move, they have to be looking all the time for when their house becomes available because of inventory,” she said.

Don't expect autumn to look much different

A lack of inventory that suppressed home sales over the summer isn’t showing signs of alleviating anytime soon.

The problem goes back to the Great Recession when some homebuilders went out of business and those that remained weren’t building at previous rates.

“We're still trying to recover,” Cox said. “I don't think people realize that we're still reeling from that.”

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Demand, meanwhile, appears to be strong.

Homes year-to-date are selling at nearly 99% of list price, according to data from the local Realtor association. They’re finding a buyer quickly, too, with the median cumulative days on the market at seven days or under in summer 2023.

Seasonally, autumn prices tend to dip from summer highs while remaining above the prior fall’s levels. Local real estate agents said they don’t foresee price cuts.

“You would have to have demand dry up for that to happen,” he said. “And I don't see that happening, barring (a recession).”

Another competitive period could be ahead

Mortgage interest rates have been climbing since 2022, a response to nearly a dozen rate hikes from the Fed, which did not touch rates at its most recent meeting, but signaled it may do one more before the year is over.

Should interest rates stabilize, or even lessen, Cox and Mays said, more buyers may be drawn to the market.

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“There's almost a pent-up desire of people who didn't buy in the last half of '22 and the first of '23 because they kept holding off because rates were going up, and now they have kind of gotten used to the fact that, well, these are the rates, so we're gonna buy," Mays said. "And I think that's what we're gonna see in the fall. It was just a transition of mindset of the buying public.”

Cox said buyers who felt "stuck" in their homes during the pandemic drove sales, and buyers getting priced out of the market now may do similarly.

"People now are stuck again," he said. "Maybe not in the same way they were with COVID, but people are ready to move and can't. And when the environment gets a little bit easier, I think people are gonna come and be ready to spend."

Growth & development reporter Matthew Glowicki can be reached at mglowicki@courier-journal.com, 502-582-4000 or on Twitter @mattglo.

This article originally appeared on Louisville Courier Journal: How was the summer housing market in Louisville? 5 things to know