Inventory is declining in key markets

Unsold inventory in the two biggest housing markets in the country, Texas and Florida, declined this week. There are fewer homes for sale now than a week ago. Inventory seems to have peaked for the season and is slowly inching down.

There appears to be two reasons we’re seeing a seasonal peak in unsold inventory now, when last year inventory in these states didn’t peak until the end of November. 

First, mortgage rates are falling, whereas last year they were rising. We may finally be on the other side of that slope, making for better dynamics for potential homebuyers. There is no sudden surge, but maybe just a little firming of demand.

Withdrawals are on the rise too. We’re seeing 30,000 to 35,000 withdrawals each week now, where last year it was more like 25,000. This probably reflects seller discouragement in a low-demand market, pulling their listings to wait until next year. It also reflects that most homeowners in the country have cheap financing, so they can afford not to sell in unfavorable environments. 

These two trends are keeping a cap on inventory for the rest of the year, especially compared to last year.

Let’s look at the details of the U.S. real estate market as of mid-August 2024.

Inventory shows slight increase

There are 704,000 single-family homes unsold on the market now. That’s a slight increase from last week. Inventory growth is slowing as mortgage rates fall. 

Even though inventory has probably peaked in Florida and Texas, the number of unsold homes across the whole country hasn’t. What we’re seeing is maybe a rebalancing of the trends.

Seller volume is on the way down

Looking at the new seller volume this week we see only 65,000 new listings unsold plus another 12,000 immediate sales. That’s still roughly 9% more sellers than last year. It’s a lot fewer sellers than is normal for August. It’s about 4% fewer sellers than a week ago. This seller volume is on the way down for the rest of the year. Fewer and fewer sellers each week on an already low number. 

Pending home sales a tick down

On the purchase side, there were 65,000 new single-family contracts pending. That’s just a tick down from last week and is a few percent higher than last year at this time. It’s encouraging that there are a few more sales each week than last year at this time, but there’s no real sign of growth yet. Do we finally show relative sales gains in the fourth quarter? We’ll keep watching.

There are 368,000 total single-family homes with sales pending now. That’s 2% above last year but basically unchanged. We’re still on the 4MM annual pace for home sales. It’ll be tricky to measure any relative improvement in home sales in the fourth quarter.

The takeaway for the home sales rate is that it’s maybe just a tad above last year at this time and the easier annual comparison starts later in September. 

Home prices inching down

The median price of single-family homes in the U.S. is inching down now and for the rest of the year. The median price of all the homes on the market is $449,000 now, which is just a fraction of a percent lower than last week. It’s unchanged from last year at this time. We’re past the seasonal peak in pricing. What we’re looking for is whether sellers do more aggressive discounting this fall than last year. Or do they simply not discount and just withdraw the listing to try again later?

The price of the newly listed homes this week is $399,998, just a hair under $400k. The new listings price is also just barely ahead of last year. That gain has been compressing.

The price of the homes going into contract this week is $385,000. That’s a notch of 2.5% down from last week and is hovering about 4% higher than a year ago. 

Price reductions declines

Just about 39.9% of the homes on the market have taken a price cut from the original list price. In the next month or two as inventory starts to decline for the year, the percent of the homes on the market with price cuts will decline also. There’s a natural seasonal curve here. Withdrawals increase in the fourth quarter – anyone who hasn’t gotten an offer pulls the listing over the holidays. We’re close to the seasonal peak in price reductions. Unless we get a mortgage rate spike like we did in the last two Septembers.

Demand will decline with the season but not exacerbate the season like each of the last two years. If you’re a seller in this market, hopefully you’re pricing to move the property and not overpricing to begin with. Much of the year we’ve had a bifurcated country with some markets getting their overbidding and immediate sales but other parts being very slow. I mentioned Texas earlier. Texas may have crested inventory for the year. The Austin, Texas market peaked inventory a few weeks ago. Austin leads the country in price reductions now, taking the top spot from Sarasota, Florida. I will be watching these markets to see if price cuts have peaked also.

The big trends from earlier in the year are shifting now. For buyers and sellers, these conditions can change fast and it can be very impactful for smart decision making. They need to hear the data from you so they know how to act.

Mike Simonsen is the founder of Altos Research.