With relentless mortgage rates and stubbornly high home prices, the mortgage payment on the median priced home in the US is now back up above the 2023 and 2024 levels for the first time since August. Affordability is getting worse for home buyers this fall. That does not bode well for home sales in the new year. It does not bode well for prospects of consumers, investors, or the industry in general in 2025.
We saw maybe two signals that buyers are backing off in the face of these relentless mortgage rates. We measured a little acceleration of price cuts, which may have happened when buyers and sellers got disappointed by the cost of money after the election.
Also, inventory declined for the week but less than expected. Inventory has been compressing vs. last year, but it expanded this week. Last year we were near the top of mortgage rates. This year hasn’t topped out yet. So those two signals are worth watching, and we’ve got the details here.
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I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of November 25, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are now 719,000 single family homes unsold on the market around the US. That’s half a percent fewer than last week, inventory is moving down for the season. There are just over 27% more homes unsold on the market than last year. That percentage increased from last week. This is a bit of a subtle way to look at the inventory trends but it implies that the inventory shrinking momentum we’ve had for a few months may have stopped.
When we released the HousingWire 2025 forecast paper earlier this month we discussed how we assume continued inventory growth in 2025, but at a slower pace of appreciation than we saw this year. We anticipate another 13% inventory growth next year. But we also assume that mortgage rates will moderate a little bit. And as of right now, mortgage rates are climbing. As rates climb, inventory climbs. Going to be a fascinating year.
In this chart we have each year’s inventory trend in a line. See how the dark line separated from the 2023 red line all year. 719,000 single family homes unsold on the market right now. In the pre-pandemic years, it’d be normal to have 900,000 or 1,000,000 homes unsold on the market at the end of November. We’re not yet to the old normal levels of inventory, those gray lines at the top of the chart, but in 2025 we’ll get closer.
If affordability continues to worsen, that will accelerate inventory build up. The 2025 lines will trend higher, even closer to the old normal levels.
There were 53,000 new listings unsold this week. That’s 9% more unsold new listings than the same week a year ago. This level of new listings will lead to inventory growth that I just referred to. When we add in the 7800 new listing immediate sales, that’s 4.7% more sellers than a year ago.
In the chart, 5% more sellers than a year ago is right in the range we want to see. The red line is right at the level of pre-pandemic sellers. When I say “Want,” I mean that I think it’s healthy for the housing market to have slightly more sellers than we’ve had in recent years. Slightly more sellers, means inventory grows a bit, that helps buyers have more selection and keeps a lid on home price appreciation. This grows especially important as home prices have stayed elevated in 2024. More supply helps curb that affordability crisis.
This is the holiday week so we’ll have a big dip in new listings this coming week of course. And then very few through the end of the year. We’ll be watching this line after January to see how many sellers are willing to test the waters.
The takeaway with the new listings data is the “Hopefully” level. If the market is going to grow in 2025, this data will need to stay with 5-10% more sellers each week than we’ve had in recent years.
There were 56,000 new contracts pending last week which was a pretty good clip for mid November. That was 6% more new contracts started than a week ago and also 6% more than a year ago.
We’ve been averaging 56,000 new contracts each week for single family homes. We’re looking here at the average pace of home sales. This chart shows each of the last three years, each week homes take offers and go into contract pending stage. The homes that start contract now will mostly close in December and January. We recently heard NAR announce October sales grew over last year. We can see that in the Altos data each week.
I’m using a 4 week average in this chart because it can jump around week to week depending on lots of little variables. If higher mortgage rates cause sales to dip notably, like what happened in the fourth quarter of each of the last two years, I’ll make sure to highlight that. Because affordability is showing no signs of improving, I am watching closely each week for hits of declines in home purchase volume. It’s Thanksgiving week so offers will be way down of course and they don’t really pick up again until January.
The takeaway on home sales is that we’re counting slightly more home sales transactions than last year, finally. I expect that growth to continue into the new year, but it’s not a lot of growth. We’re forecasting 4.2 million home sales in 2025 up from 4 million in 2024. We’ll see that trend in this chart each week. If the trend falls, we’ll review our forecast lower. Stay tuned.
In spite of the affordability crisis, we measured a little uptick in the price point for home purchases this week. The median price of the newly pending home sales was $385,000 which is a 1.3% increase from a week ago and is averaging 5% more than last year. So even in this world of 7% mortgage rates, with the highest mortgage payment ever, home prices nationally have not dipped.
As has been true for a couple months, home prices are holding up better than I expected with demand that was so weak earlier this year. What we’re measuring here are the sales prices, before the sale happens. This is the price point people are buying. Asking prices are up over last year too. The median price of all the homes this week is $429,900 which is 1% above last year. And the median price of the new listings for the week came in at $397,000. The price of the new listings has been averaging about 3% above last year. This slightly positive home price appreciation is the same pattern we’ve been in. 1-5% home price gains across the country, depending on how you measure home prices. Some markets are up more than that, some are down.
It also sets us up for a similar pattern in 2025. It’s hard to imagine scenarios next year where home prices rise dramatically unless there is some crisis which lowers mortgage rates into the low 5s. In the HousingWire forecast paper we published recently we highlighted a bunch of scenarios where home prices could fall nationally in 2025. We examine these scenarios and identify data that you can watch to know if one of these home price correction scenarios is underway. Affordability is a legitimate reason to assume home prices could fall next year. That’s why we do this work each week.
These measures of home prices are looking at now. Some of the data looks into the future for price trends. And when we look there, maybe we can see signals of prices softening with these recently elevated mortgage rates. The percent of homes on the market with price reductions ticked up this week to 39.1%. It seems likely to me that there are some sellers who didn’t quite get the deal done in October and now after the election, mortgage rates have risen again, so those homes didn’t get offers.
If your house is listed and the market cooled after the election, you have two options, you can withdraw to try again in the spring, or you can cut your asking price. It looks like some folks are cutting their asking prices.
In each of the last two years, this moment in late November was the peak of mortgage rates and the peak of price reductions. It’s the holidays so homes that haven’t had offers will also commonly be withdrawn from listing to maybe try again after the new year.
In the Altos data, we look back over 90 days to measure price cuts. Most MLSs let you withdraw for 30 days and relist as a “new” listing. In our data we track those relists, we do a total days on market, and we track the price cuts over as long as 90 days. So if a house is pulled now at Thanksgiving, and relists in January at a lower price, we’ll see that in January and track it as a price reduction from now. Of course right now, the homes that have been withdrawn are not listed and are not counted as price reductions. So over the holidays the percent of the market with price cuts declines for the season. We see that normal yearly pattern in every market.
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