Home prices hit a new record high this week, as the true effects of rising interest rates won’t be felt for several months. There is so much momentum with homebuyers and we’re just now approaching the peak home shopping season so it’s totally normal that prices climb weekly and inventory also climbs.
We’re starting to hear anecdotes about fewer bidding wars, but because of the time of the year, expect demand will stay healthy for the next few months.
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. I’m Mike Simonsen, I’m the CEO of Altos Research. Let’s look at the data and see the details for the week of April 4, 2022.
Let’s start with home prices today. After spending a few weeks clustered right around the psychological threshold of $400k, the median home price this week jumped to $410,000. That’s up 2.5% from last week. Steep weekly price increases are perfectly normal for this time of year. We’re only halfway through the spring buying season, $430,000 or so should be the peak by June or so.
Also bullish for future transaction prices is the leading indicator that we call the price of the new listings. It also jumped big this week to $419,000, a record high. These are the homes that got listed for sale this week, the sellers and the listing agents in aggregate know exactly where to price the house. They know how many bidders are still bidding and they know over bids and closings.
So despite the anecdotes we’re maybe hearing about fewer bidding wars happening as mortgage rates spike, the evidence is that buyers are buying and sellers know it. At some point in the next few months this’ll change and we’ll see the inflection point in the price of the new listings. So these are your leading indicators for home prices, and as of right now, buyers are undeterred by higher mortgage rates.
One thing that’s been on my mind lately is the pandemic recession which was so steep and so severe for people losing their jobs, and only resulted in 3 weeks of home price declines. Buyers jumped in and started buying well before any stimulus hit. So millions of Americans lost their jobs, but millions more decided to buy, despite all the economic fears of the time. Now because of the mortgage forbearance policies even the most distressed home owners didn’t have to sell. That averted a crisis and kept supply low. If we roll into recession next year we won’t have forbearance so that implies greater inventory should finally become available.
Inventory is in a slightly more normal pattern than last year. Available inventory of unsold single family homes ticked up to 255,000 this week. Inventory has definitely turned the corner. Inventory usually starts climbing in February, last year it wasn’t until the end of April. This year the low point was in March so we’re on a much more normal curve. Expect inventory to climb through the end of June at least.
By the way, next week April 14 we have our hour long April webinar where we’ll revisit the inventory forecast for the year and look at the scenarios that rising rates might trigger. These webinars have been terrific so if you’re into all the data we spend the better part of an hour digging in. Plus we’ll look at how some different local markets fared in 2018 the last time rates rose this high. Some markets are much more sensitive to rate changes than others. We’ll check that out next Thursday April 14 at 10am pacific.
Here’s another look at supply and demand that you might find useful. We know that inventory is low partly because demand has been so high. Americans are buying everything in sight. This is a view of total active listings and the total that are pending contract. There are now almost 70% more homes sitting in contract not yet closed than there are actively for sale. That’s highly unusual of course. I’d expect this to compress and hopefully invert as the market cools, we get more inventory, and slowly returns closer to a historically normal balance.
Immediate Real Estate Sales Tracker
Here’s the immediate sales tracker for the week. These are the homes that were listed for sale, took offers essentially immediately and went into contract. 25,000 immediate sales this week. Still over 30% of all the new listings around the country are going into contract immediately. This is slightly fewer than last week. One downtick is far too early to call it a trend, but keep your eyes on it. If that starts to compress as a proportion of the total new listings, that’s the market telling us that demand has backed off, fewer bidding wars and inventory building. As of right now, the immediate sales is consistent with the other data, showing plenty of buyer demand despite the rapidly rising mortgage rates. Any demand decline from more expensive payments is still out in the future. But if you’re a seller, you can see why it might be best to list now rather than delay. While demand is still hot.
The other demand indicator we’re watching closely is price reductions. At 17.1% there are slightly more homes taking a price cut now than last year and a slight uptick from last week for the first increase of the spring. Last year the frenzy was still building in early April. You can see that normal years price reductions start creeping up in the second quarter.
In November of 2018 the 30 year rate hit 4.9% and price reductions hit their highest point in this 7 year span. Normally about a third of homes take a price cut before they sell. We’re only at 17% now, just slightly more than last year but still very near record low. I’d expect we’ll get over 30% in the latter half of the year. I’ve said recently that when we go from 5 bidders on a home to only 2 or one, it’s going to feel a bit scary. Like OMG the market is crashing. I expect this fall will feel that too. Even if the market isn’t crashing, it’ll feel dramatically different. Some sellers will get caught off guard.