Mike Simonsen is the founder and president of real estate analytics firm Altos Research, which has provided national and local real estate data to financial institutions, real estate professionals, and investors across the country for more than 15 years. An expert trendspotter, Mike uses Altos data to identify market shifts months before they hit the headlines.
We're wrapping up 2023, and the housing market is about to settle down for a few holiday weeks before beginning the year with new listings and new market signals.
But there is something notable in the data from November and December: we're already getting early signals that we’ll have more sellers in 2024, and therefore more home sales.
Every week Altos Research tracks every home for sale in the country. We analyze all the pricing, supply and demand, and all the changes in that data and we make it available to you before you see it in the traditional channels. If you aren’t using Altos market reports with your clients, your buyers and sellers, now might be the time to step up. Go to altosresearch.com and book a free consult with our team. Because everyone is worried about what’s happening right now. They need you to help them see clearly. The data we cover here in these national videos is available for every zip code in the US. Join us to dive in.
I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of December 18th. Please refer to the video below for all the charts I mention in this transcript!
Available inventory of unsold single family homes on the market this week dropped 1.4% to 539,000. There are now 3.2% more homes on the market than the same week last year. There are still 34% fewer homes on the market now than the same week in 2019, so there’s no flood of sellers of course, but inventory is inching up over a year ago as homeowners settle into the new reality of 7% mortgage rates.
In this chart, each line is a year. Inventory peaks usually in August and then declines for the winter. In this post-pandemic era, inventory now peaks much later in the year. This year was the middle of November before inventory peaked.
This year’s curve is the dark red line here. If you look closely you can see how this year and last year’s curve had a sudden spurt of inventory growth starting in September. Both this year and last year in September mortgage rates spiked. That cooled demand and the market saw late year inventory increases. Mortgage rates have been falling quickly in the last few weeks. If that continues after the new year, expect inventory to get gobbled up by buyers happy about newfound affordability.
The gray lines at the top of the chart are where inventory used to be. In the olden times. Are there conditions that will get us back to the old levels of inventory? My suspicion is that it’ll take multiple years at rates in the 7s or higher to gradually build inventory back. Could a deep recession create a lot more inventory too? Yes it could, but I suspect that this recession, if and when it finally arrives will result in less inventory because homeowners have such a great deal now. I’ll spend more time on this concept in a separate video coming soon.
New Listings & Immediate Sales
Here’s what is interesting. We’ve had 11% more new listings this week than the same week a year ago. 48,000 sellers hit the market this week. Of those over 8,000 are already in contract and no longer in the active inventory count.
For 18 months we’ve had a dramatically restricted supply of home sellers. The shift started the first week of July 2022. Each week we’ve had 15-20% or even 30% fewer new listings than a year prior. Now we have a few more new listings.
This trend looks poised to continue after the new year. One implication is that more sellers means more sales can happen in 2024.
We’re also watching for any signs of a flood of sellers. There are not signs of a flood. Even though new listings are inching up, there are still 5-10,000 fewer sellers each week than in the years pre-pandemic. So there is no sign of any surge of investors panicking or distressed unemployed people unloading. But this is the chart we watch every week to know if that possibility happens. So keep your eyes here.
We also want to watch this immediate sales chart. That’s the light portion of each bar. If there are more sellers and the immediate sales falls, that is a very fast signal that supply is up and demand is down. If that were to happen, that would be a notable change and we’ll want to pay close attention. That is not happening at the moment. New listings are up over last year and immediate sales are up also. So so far the new inventory is being met with demand.
The other place we can watch whether buyers are going to take up more inventory is in contracts data each week. At Altos we track every home for sale in the country every week and we track all the contracts pending too. And here’s what we know. Home sales each week all year were tracking 30% fewer than the year prior. There were fewer sellers and fewer buyers, the market has been in deep recession. But that recession has been coming to a close and we have crossed into expansionary sales each week.
This week there were 46,000 new contracts for single family home purchases around the country. That is 7.7% more sales than last year at this time. In this chart we have the change in new contracts from the year prior. There’s a horizontal line at 0%. Below the line the market is contracting with fewer sales than the year prior. Above the line are weeks that the market is expanding, with more sales than the year prior. See how the year started way below, with 30-40% fewer sales each week. Gradually we gained ground. But even as recently as October, the market was still contracting. If you’re a realtor or a loan officer and your business is dependent on transaction volume, you felt this intensely.
But now at the far right end of the chart, each week is above the line which tells us that more new contracts are started and the market is finally back to growing again. Now, these are growth off of very low numbers, this is not a boom market, but it is the first signs of growth nonetheless.
OK - so that’s the current state of supply and demand for residential real estate around the country. What about prices? As I mentioned earlier, when I talk about sales increase do not mistake me for saying that therefore I am saying home prices are going to jump. There is nothing in the data that says home prices are jumping in 2024. So let’s shift our attention to what the data is saying about 2024 home prices.
We know that in 2023 despite demand for real estate declining, supply also fell, so we ended up with a balanced market and home prices are flat to up just a hair over last year. Demand was low but prices held up because supply was so low too.
Will that happen again in 2024? One place we look are the price reductions data. This is a leading indicator for where home sales prices will close in the future. We can see that last year there were thousands more homes sitting on the market with price cuts and no offers than we have right now. The future sales prices are in a stronger position than they were last year at this time.
The leading indicators for prices are not strong though. There is no sign of a rally in home prices. Currently 37.6% of the homes on the market have taken a price cut from their original list price. That’s more than normal and shows that we don’t have strong demand. We don’t have a flood of supply hitting the market but this level of price cuts shows us that if we did somehow get a flood of sellers that prices would probably correct down very quickly. So keep your eyes on price cuts as we enter the new year.
Price reductions are now declining into the new year. The price cuts data is very sensitive to changes in market demand. We can see both last year and this year price cuts accelerated in September exactly at the moment that mortgage rates spiked both times. In this chart the dark red line is this year, the bright red line is last year. Both years did that late jump with mortgage rates.
So again, demand is obviously too weak for home prices to rally higher in 2024. The median price of single family homes in the US is now $420,000. That’s down a little over 1% from last week. Which is a normal change for December. As I’ve been saying for a few months, home prices are finishing the year 2-3% above 2022.
That’s basically flat for the year. In this chart view of many years change in home prices you can see that the June 2023 peak never got as high as June 2022. I’d be surprised if we surpass it this year either. Because rates are still in the 6s or 7s I expect a slow price climb after January. As of now, 2024 looks like another year of roughly flat home price changes. Give or take a few percent. If mortgage rates fall substantially - early in the year - then that would be one scenario where demand would pick up more than supply, inventory would fall and home prices could push higher. This needs to happen early in the year because the bulk of the year’s activity happens in the first half.
We can see more sellers ease into this market now, and we can use the price of the new listings each week to gauge whether buyers are happy about that. That’s the bright red line on this chart. By the end of January we’ll see if buyers find the current mortgage environment favorable. The bright red line will dip for Christmas / New Years and then start climbing again with the fresh inventory in January. At that time we watch how steep the climb is. Two years ago, to start 2022 it was the end of the pandemic boom. Everyone knew it. Rates were low but going higher. So buyers grabbed everything as fast as they could. The bidding wars drove the price of the new listings higher. See how quickly the bright red line jumped in January 2022. Last year that climb was much slower. That showed us some demand but obviously less than the crazy times. 2024 is going to look much more like 2023. That leading indicator sheds light on the whole curve for the year.
To wrap up for this week. We’ll have a few more sellers in 2024 but not a lot. Home sales are on the climb too. Available inventory is still restricted but is a little better than last year too. So inventory up, sales up. But prices look like they’re be flat again over the next year and probably not surpass the all time high set 18 months ago in June 2022.
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See you in the new year!