Housing inventory defied all predictions in 2023

Going into 2023, people thought housing inventory would skyrocket, home prices would crash, and we would see the housing market of 2008 all over again. We created this weekly tracker at the end of 2022 to give people a live weekly outlook on everything that drives the housing market and which factors to follow. Those reading the tracker would have understood why the housing market dynamics shifted on Nov. 9, 2022, and they’ll be ready for what’s coming next. 

Looking back on 2023, the inventory story was a big surprise even as mortgage rates headed toward 8%, as the data below will show. Traditionally, with the tracker articles, we talk about purchase application data and mortgage rates as well as inventory, but purchase app data isn’t given during the holiday week and not much happened in the bond market last week. So today’s tracker is focused on 2023, the inventory data, and how different this year was from 2022. 

Weekly housing inventory data

One of the calls I got wrong in 2023 was that I assumed that if mortgage rates got above 7.25%, we would have a few weeks where inventory grew between 11,000 and 17,000 homes per week. This didn’t happen once in 2023 — even with rising mortgage rates. Knowing that home sales weren’t going to crash in 2023 as they did in 2022, I made adjustments to my forecast to account for a more steady sales market, but even with that adjustment, we never got the weekly inventory growth levels I was looking for when mortgage rates got above 7.25%.

I recently discussed this and other crazy data lines with Mike Simonsen, president of Altos Research, on his Top of Mind podcast.

• Last year, according to Altos Research, the seasonal peak for housing inventory was Oct. 28. This year’s peak was Nov. 17.
• Weekly inventory change (Dec. 22-29): Inventory fell from 528,601 to 513,240
• Same week last year (Dec. 23-30): Inventory fell from 508,777 to 490,809
• The inventory bottom for 2022 was 240,194
• The inventory peak for 2023 is 569,898
• For context, active listings for this week in 2015 were 1,013,245

New listings data

The one positive story about housing inventory that I loved to see in 2023 was that the new listing data didn’t make another new leg lower, which bodes well for the housing market in 2024. Since I believe most home sellers are also homebuyers, once new listings created a new low level after mortgage rates reached over 6% in 2022, it added another layer of home demand falling off a cliff. The speed at which home sales crashed in 2022 was historic, but in 2023, no matter how high mortgage rates got, new listings data didn’t create a new leg lower. 

We have been forming a bottom in the new listings data, and I had expected some growth in the second half of the year, as I discussed on CNBC months ago.

What we want to see in 2024 is new listing data growing in the spring season. As you can see in the chart below, we have a big gap between 2023 data versus 2021 and 2022 data. To have a more functional marketplace, we need new listing data to grow back to those levels, and this is the one thing I will be rooting for in 2024.

Here is the new listings data for last week in the previous several years. The numbers look similar because it’s at the end of the year. However, spring inventory was much different over these years — that’s where the seasonal volume always increases. 

• 2023: 24,394
• 2022: 19,128
• 2021: 24,394

For all those people who thought we were going to see a repeat of housing from 2008 or even worse; make sure to read and remember this new listing data line.  In 2021, 2022, and 2023, new listing data trended at the lowest levels ever. If I averaged the number of new listings from last week over the last three years, it’s only 22,638 new listings. In 2008, this number for that week was 249,655. That is more than 10 times more listings!

So even during the peak new listings seasonal period, inventory was much lower than the seasonal low period in 2008, which is the last week of the year. Now you know why I stress that reading is a good thing and disinformation campaigns are always done by crazy groups. From 2008-2011, new listings data averaged between 250,000 and 400,000, peaking near 400,000 in 2011. We have never had any data in the last 12 years showing that these two markets were similar.

Price cut percentage data

This is one data line that can confuse people, because they don’t know that in any given year about one third of all homes will take a price cut before they are sold. The number of homes with price cuts should grow when demand weakens and inventory rises, but the one wild data line in 2023 was that even with mortgage rates rising all the way to 8%, the number of homes that had price cuts stayed 4% below 2022 levels weekly. It surprised me that we didn’t get any upward movement on price cuts since home prices and rates were rising together. However, this shows how abnormal the second half of 2022 was with the historic crash in sales. This will be a crucial data line in 2024 if rates decrease and demand increases.

Price cut percentages this week over the last few years:

• 2023: 35%
• 2022: 38%
• 2021: 24%

That’s a wrap

The 2023 housing market was wild, but it doesn’t compare to 2022, which was the craziest housing year ever. Going into 2024, we need to focus on housing in a more normal environmet and keep an eye on the labor data to see if that changes the inventory story. 

Next week is jobs week, so we will get four labor reports, which have the potential to move mortgage rates. Outside of that, it’s time to look to 2024. My 2024 housing forecast and forecast podcast will both come out on Monday.