The housing market has about 40% fewer homes for sale than before the pandemic, and listings continue to decline

The current housing market offers 39% fewer homes for sale than pre-pandemic, according to Redfin.

In the four weeks to June 11, the total number of homes for sale in the US saw its biggest drop in 13 months.

Homeowners are unwilling to part with low mortgage rates that were promised before borrowing costs rose.

The housing market has 39% fewer homes for sale compared to before the pandemic, according to a Redfin report on Thursday.

The problem is unlikely to improve soon, as the overall number of homes for sale fell 6% year-on-year in the four weeks to June 11, the report said, marking the biggest decline in 13 months. And new home listings fell 23%, the tenth consecutive month of double-digit declines, amid a slump in homebuilding.

Mortgage rates are now hovering near 7%, nearly double what they were in 2021, when ultra-low interest rates fueled a home-buying boom. And don't expect much, if any, relief in the near future as the Federal Reserve remains dovish.

"The Fed's indication that additional interest rates are expected to be raised is not what the apartment buyers want to hear. This is expected to keep mortgage rates high and maybe even raise them slightly," said Redfin head of research, Chen Zhao. "People who sit on the sidelines and wait for mortgage interest rates to drop, should know that it is unlikely to happen in the foreseeable future. If a home that's in your price range and has everything on your wish list comes on the market, there's no good reason to wait."

High mortgage rates have discouraged homeowners from selling or moving so they can hold onto lower payments, Redfin said. In fact, a separate Redfin report found that 91.8% of US homeowners have mortgage rates below 6%.

Those numbers are the main reasons behind the limited inventory, according to Redfin, and the lack of options for buyers could mean the home price bubble will continue to grow.

To be sure, there is still demand in the market. Mortgage purchase applications climbed 8% over the past week, and Redfin's homebuyer demand index – which measures requests for tours and agent services – is close to its highest score in a year.

But with demand outstripping supply, house prices have yet to drop significantly.

Edward Sailer, associate vice president of housing economics at the Mortgage Bankers Association, previously told Insider that the housing market has never been more unaffordable for new buyers. The payment index of the group's purchase requests reached a peak in June, which indicates a sharp deterioration in borrowers' affordability conditions.

"For new home buyers, this is the worst situation since the end of the Great Recession," Seiler said.