Why are home prices at all-time highs with more inventory?

Let’s keep it simple: total active listings are still below 2019 levels nationally, and the days on market are under 30 days today. Existing home sales aren’t crashing as they did in 2022, when we saw home-price declines in the second half of 2022. When you connect the dots, this is a short and simple answer to why housing inventory and home prices are both rising.

From NAR: Existing-home sales slipped 0.7% in May to a seasonally adjusted annual rate of 4.11 million. Sales descended 2.8% from one year ago. The median existing-home sales price jumped 5.8% from May 2023 to $419,300 – the highest price ever recorded and the eleventh consecutive month of year-over-year price gains. The inventory of unsold existing homes grew 6.7% from the previous month to 1.28 million at the end of May, or the equivalent of 3.7 months’ supply at the current monthly sales pace.Below are four charts showing the data from NAR mentioned above.

Existing home sales

When mortgage rates started to rise earlier this year, existing home sales trended lower. I believed this would be the case, so much so that I wrote that the February report would likely be the seasonal peak monthly print in home sales this year. Just as they did in 2023, higher rates took the winds out of the growing sales numbers. However, what is different this year from 2023 is that we have more sellers that will be buyers. As you can see in our new listing data, we are showing growth.

That means that our weekly pending sales contract data is showing growth year over year. It’s nothing spectacular but it’s growth nonetheless. However, if mortgage rates went lower and stayed lower, everyone would be selling more homes today.

Home prices and inventory

Of course, if you follow our weekly tracker data, you know that inventory has been growing this year. The existing home sales print is catching up to our data, and this, to me, is the best story for housing in 2024 because when the housing market was savagely unhealthy in 2022, the NAR total active listings data was below 1 million.

Also, the days on market were in the teens, and nothing good is happening when the days on the market are a teenager or less because that means we either have massive credit sales or simply have too many people chasing too few homes. Of course, the housing market didn’t have the credit sales boom it had from 2002-2005, but it lacked inventory.

As you can see below with our weekly data, inventory is growing at a healthy clip this year. It’s a bit too slow for my taste, but good enough.

Since most of the country is still below 2019 inventory levels and home sales aren’t crashing anymore, national prices are rising. However, the year-over-year data will cool down going forward. We have been working from extremely low comps over the last two months, as the data last year showed median home prices declining year over year. So, the bar has been low but won’t be low for the rest of the year, and that will cool down year-over-year price data. Also, inventory and price-cut percentage data have gotten better after March.

All in all, there was nothing too surprising about today’s exciting home sales report. Mortgage rates have fallen recently and this last week was our first back-to-back week of purchase application data growth. We will see if that streak continues next week.

As I always stress, tracking the fresh weekly data lines on the weekend tracker, which considers a number of housing variables, means you won’t be surprised when the existing home sales report comes out. Look for that tracker article every Saturday so you stay up to speed on what is happening in real time.