Well friends, Americans are buying houses this winter. Each week inventory is falling and pendings are climbing. The market has fewer price reductions and more immediate sales each week. None of this is crazy hot like last year, but the data is pretty irrefutable. I’ve been calling the trend “surprising” but I’m no longer surprised, it’s been so consistent.
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I’m Mike Simonsen, I’m the founder of Altos Research. Here’s what we know as we start February.
Available inventory of single family homes on the market declined by another 1.8% this week to 457,000. It’s not totally unheard of for inventory this early in the year to creep down for a few weeks. This year’s change is notable because inventory was rising so unusually fast in September and October. If you are only watching the headlines or if you like to watch the real estate crash YouTubers, you’d be expecting now for inventory to be climbing dramatically each week. It’s simply not happening. Inventory across the country is declining because we have more buyers than sellers. The fact is we have very few sellers. This trend doesn’t seem to be poised to change direction either. So if mortgage rates stay roughly in the low 6s, we now expect inventory to keep declining each week through February.
This week only 52,000 new listings came to market. Last year at this point there were 58,000. Plus immediate sales are back to 20% of the new listings. Of those 52,000, 11,000 took offers and went into contract within days of listing. The good properties, priced well, go quickly. That might seem surprising if you’re not in the market right now. But that’s what’s happening. It also tells us there is no sign of any flood of homes for sale coming. There are no distressed sellers. There are no panicky investors. There are fewer move up or moved down sellers.
On the demand side, we can see the pending volume way up over December and climbing rapidly. There are now 279,000 single family homes in contract with the sale not yet closed.
There are 26% fewer pendings than last year, of course. But home buyers now are quickly narrowing that gap. Last year at the end of the frenzy we had 8% more new pendings. This is what we mean when we say we have home buyer demand, it's not crazy, but it is sufficient. And it’s way better than it was in the fall.
In fact the price of the new pendings ticked up this week, in a sign of pricing strength. The price of the homes in contract is flat year over year. At $365,000 this reflects how strong the market was then and how much it cooled in the last 8 months. Remember that the pendings are sales that will complete in the future. 30-60 days. It’s one reason we can see that home sales prices are likely to stay flat for 2023 of 2022. Prices are not falling and those going in to contract aren’t jumping from here either.
The median price of single family homes in the US is essentially unchanged this week at $415,000. While we have the tight supply I’ve been talking about, there is no pressure for home prices to rise this year. Mortgage rates are significantly more expensive, and while we’re hearing plenty of anecdotes about multiple offers on listings, we’re not hearing about over bidding. We can start to see the trajectory of home prices in the dark red line. Prices climb every spring with the best new inventory, but prices will be much slower to climb this year than last. Again this is the signal that home prices will finish 2023 flat year over year from the end of 2022.
And price reductions are down to 33% of the market now. It’s a totally normal market to have a third of the homes on the market take a price cut before they sell. Totally normal. This is not a cold market. This is not a crashing market. This is not a market with panicky sellers.
So if you see headlines or social media fear mongers about some kind of housing crash - ignore them. This market is improving, at least by this measure, rather than weakening.
This is of course national data and the local markets are behaving very differently from each other right now. If you need to get your local data to your buyers and sellers right now, you should join us at Altos Research. Go to AltosResearch.com and book time with our team to learn how to interpret the market signals for the people who need it most right now. They need you to be the expert for them.
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See you next week!