A new Realtor.com® report sums it up as a "chicken and egg" problem. Allow us to explain.

It all started with mortgage rates - which are about 1 percentage point higher than last year and hovering in the 6% range. This is a huge deterrent not only for buyers, but also for sellers, who feel "locked in" to their current properties (and the lower mortgage rates they got years ago).

As a result, even homebuyers willing to pay high prices are finding few homes for sale, with 22.7% fewer new listings in May than last year.

"Many sellers report that they are concerned about finding another home, which may cause some of them to suspend their listing plans," said Danielle Hale, chief economist at Realtor.com®." But this reduces the total number of options available to buyers in the market."

In addition to scarce options, homebuyers are struggling with high home prices. in May, the median listing price increased to $441,000, up from $430,000 in april.

And, prices are likely to be even higher in June.

"Historically, we typically see home prices peaking in June," Hale said." I expect this year to be typical in that regard, with home prices peaking in June and starting to fall back in July."

In fact, last June, median prices hit an all-time high of $449,000. However, given that annual price growth has been scaled back significantly, it is likely that home prices will not exceed that figure this June. In fact, home prices in May were only 1.1 percent higher than the same month last year.

"Based on current trends, it's possible that [home prices] will not reach the previous year's peak for the first time in our data," said Sabrina Speianu, economic data manager at Realtor.com.

While the news should come as a relief to buyers, today's higher mortgage rates mean they are still paying more for their homes now than they did last year-about $280 more per month if they make a 20 percent down payment.

However, if mortgage costs refuse to fall, home prices will eventually have to drop to compensate, and in some cases are already falling. Price reductions rose from 10.2 percent of listings last May to 12.7 percent this year.

As a result, good things may be coming to buyers who wait.

"Sellers seem to be targeting relatively high starting points in this year's market and are willing to negotiate when necessary," Hale said.

While few new sellers have entered the market recently, the overall number of listings - both new listings and older homes still on the market - is up 23.4 percent compared to last May. That said, many listings have been picked up and passed on by buyers, and homes languished on the market for a median of 43 days, 14 days longer than last year.

Certain markets have seen a significant slowdown, such as Raleigh, N.C., where there are a full month more listings than last year.

"Fewer homes are selling because buyer demand has dropped," said Ryan Fitzgerald, a Realtor with Raleigh Real Estate in Raleigh, N.C. "There are fewer homes for sale." This has created more homes for sale. The increase in inventory is starting to put some downward pressure on pricing."

However, even in a slow market like Raleigh, multiple buyers will compete to buy a home if the price is right.

"We're still seeing multiple offers," Fitzgerald said, "as well as over offers to win a home that's priced right and in a good location." In the past week, we've had several clients win and lose in multiple offer situations."

While this may seem like an intractable real estate impasse, the cracks that are emerging could move the housing market forward. And, even if sellers don't list their homes at all, such a breakthrough could occur.

"Fortunately, builders are trying to pick up the slack, and new home sales are up and almost back to pre-pandemic highs," Hale added." As a result, homebuyers frustrated by the lack of options may be considering looking at new homes instead of existing homes."

In fact, new construction has a distinct advantage in today's market because they often work with preferred lenders that can offer lower mortgage rates. Many are also very willing to offer other discounts, which can keep the final price lower than the price of an existing home.

Hale said new homes are rising at an alarming rate, especially in the South." In the past 12 months, single-family housing starts in the South have exceeded the pre-pandemic average."

Fitzgerald agrees that new construction may be the "best option" for some frustrated buyers.

"Builders are pricing their inventory fairly and are building floor plans that fit the needs of today's buyers," he said.