3 months ago
27
We finally have six weeks of numbers that hit my housing inventory growth model perfectly in 2024. Last year, with higher mortgage rates, we had zero weeks at this level so I am now giving 2024 inventory growth a grade of A.
Low inventory has plagued the housing market since the pandemic, plummeting to all-time lows in March of 2022 when we only had 240,000 single-family homes available for sale. Today that number is 668,383. While this is still far from average, it’s a huge plus that we are no longer in a savagely unhealthy low inventory market in parts of the country.
Yes, home prices are still rising in 2024, but the pace is significantly slower than in 2020 and 2021. The labor market has allowed mortgage rates to stay higher for longer and with the inventory growth this year, I feel much better about rates falling than I did in 2022 or 2023. I recently spoke about this in an interview on CNBC.
Weekly housing inventory data
I know I shouldn’t count a kickback holiday week as positive inventory growth, but it’s my chart party, and I will roll it out how I like. So we are accepting the sixth week this year of inventory hitting into the range of 11,000-17,000, with inventory growth of 16,910 last week.
- Weekly inventory change (July 12-19): Inventory grew from 651,453 to 668,383
- The same week last year (July 14-21): Inventory rose from 471,603 to 480,448
- The all-time inventory bottom was in 2022 at 240,497
- The yearly inventory peak for 2024 is 668,383
- For some context, active listings for this week in 2015 were 1,201,808
New listings data
New listings data, while growing year over year as expected, hasn’t hit my minimum target of 80,000 for the peak weeks this year. So far the weekly high print in 2024 is only 72,329. The seasonal decline in new listings will begin soon and we will see if we get fewer sellers in the second half of the year than the current trend.
Here are the number of listings for last week over the last several years:
- 2024: 68,681
- 2023: 62,859
- 2022: 80,089
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. As rates have stayed elevated, the price-cut percentage is higher than in the last two years, and certain pockets of the U.S. have higher inventory than the national data.
A few weeks ago, on the HousingWire Daily podcast, I discussed that the price-growth data will cool down in the year’s second half. Here are the price-cut percentages for last week over the previous few years:
- 2024: 39%
- 2023: 34%
- 2022: 35%
Pending sales
Below is the Altos Research weekly pending contract data year-over-year to show real-time demand. With more sellers who are buyers, we have a tad more demand this year. Compared to the purchase application data, these are live weekly contracts, where purchase apps data looks out 30-90 days.
- 2024: 382,435
- 2023: 378,227
- 2022: 418,983
Purchase application data
With all weekly housing data, we always see a holiday impact in the data in purchase apps. Last week the unadjusted data showed 22% week-to-week growth, but we never use that data line. Seasonally adjusted was down 3%. Assuming that rates go lower in the second half of the year, we need to be mindful of the weekly purchase apps, as four of the last six weeks have been positive, and this usually takes 30-90 days before it hits the existing home sales levels.
Since mortgage rates started to fall in November 2023, we’ve seen 16 positive prints, 15 negative prints, and two flat prints in the week-to-week data. However, as mortgage rates began to rise earlier this year, we observed a decline in demand. The year-to-date data for 2024 is still unfavorable, with 10 positive prints, 15 negative prints, and two flat prints.
10-year yield and mortgage rates
Last week was mild with the 10-year yield and mortgage rates. There was not much movement, as the 10-year yield started the week at 4.24% and ended at 4.24%. Rates for some pricing metrics went up on Friday afternoon. As we have discussed for some time, the 4.20% level on the 10-year yield is a tough nut to crack, but the recent downtrend in yields is still intact. The chart below closes at 4.17% but on Friday, the 10-year yield finished the week at 4.24%.
Mortgage spreads
Again, the one positive story for rates this year is the spreads — if the spreads didn’t improve this year, we would have a much different housing story in 2024. However, we could see this story improve even more since they have been returning to historical norms. If mortgage spreads were typical today, we would have sub-6% mortgage rates without the 10-year yield falling much. Imagine if both fell together!
If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.52% higher right now. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.
The week ahead: Home sales report will likely disappoint
Existing and new home sales will be released this week; both reports should fall short of the sales estimates. Recently, we’ve had mortgage rates fall and purchase application data grow: four out of the last six weeks have had positive data. But purchase apps look out 30-90 days so this week’s reports will have had a lot of higher rates built into them, and we also had two fewer business days in June.
This week we’ll also have a few bond auctions and Fed President Bowman is speaking on Wednesday. She is the most hawkish Fed president so it will be interesting to hear her take one week before the Fed meets.
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