Home Prices Are Holding Steady as Few Homes Hit the Market

A little uptick in available inventory this week. Two weeks ago was the Labor Day holiday, and the data shows a little rebound in available inventory of homes for sale on the market after that. That’s actually the first up week in a few weeks. Our forecast for the total number of homes on the market at the end of the year didn’t change however. We should have a few more weeks by the end of October where inventory rises and a few weeks when it’ll fall. But then by November inventory will fall quickly through the end of the year. We still have a critical shortage of homes for sale in this country, and it no longer appears that is going to end any time soon. Even as this market is much slower and interest rates are much higher. But of course we’ll keep watching and report here as it happens.

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I’m Mike Simonsen, I’m the CEO of Altos Research. Here’s what the data looks like for the week of September 19 2022.

Real Estate Inventory

Available inventory of single family homes for sale rose almost 1% this week back up to 552,000. This week’s rise follows three down weeks of shrinking inventory. It’s not uncommon for unsold inventory of homes on the market to rebound a bit the week after the Labor Day holiday. 4 of the last 6 years that’s the pattern. And that’s what happened this year. Our forecasting model expected about half a percent increase in available inventory, and we saw almost 1% more homes on the market this week. We have 26% more homes on the market now than last year at this time and still 43% fewer than in 2019 before the pandemic. You can see 2019 here with 963,000 single family homes on the market, then 573k, then just 430 last year. Now we’re back up to 552, which is still very very low.

There are some parts of the country that have more inventory than they did pre-pandemic mostly due to new construction finally hitting the market. But not many. It’s worth paying attention to which markets are seeing that change.

Real Estate Inventory Forecast

When we look at the new listings this week you can see how low it’s been and just a little jump this week. 63,000 single family homes hit the market and aren’t already sold. Each line here is a year. The dark red line is this year. New listings each week. You can see how they dip at Labor Day like last week. A little uptick this week and then gradually falling through the end of the year. If you follow the dark red line early in the year buyers were buying before the homes had any time to sit on the market. Then in June and July we had relatively more listings, then suddenly fewer again. You can see where the dark red line will curve through the end of the year. This shows us that there’s not a lot of seller competition and that buyers are not likely to start 2023 with much selection. There’s just not that many homes for sale.

Home Prices

Home prices held steady this week with the median price of single family homes in the US at $439,900 right now. Home prices will hover roughly here for probably 4 more weeks before dropping for the holidays starting in mid-October. So this is totally normal pricing behavior for this time of year. We keep on the lookout for price or inventory moves that would signal the market cratering quickly but we just don’t really see it. At least not yet. 

The median price of the new listings this week actually jumped up to $399,000. Little moves like this in the light red line are totally normal too. You can imagine as a marketing strategy, the sellers decide to wait until the holiday passes so we can maximize the traffic and attention that a new listing gets. You can see the light red line rarely moves smoothly week over week. It jumps around a bit. But as I’ve said in the past these are enough signals that home prices aren’t dropping abnormally. These are seasonal pullbacks and we’ll end the year with about 10% home price appreciation, as I’ve been highlighting all year. 

Home Price Reductions

The percent of homes on the market with price reductions ticked up this week to 40.6%. 40% of the homes on the market have taken a price cut sometime in the last few months. Price reductions will continue to inch up through October. These are homes that didn’t get the offers they were hoping for and you want to try to move it before the holidays. While 40% is more price cuts than we’ve seen in a bunch of years, it’s not record high. During the low point of the bubble burst, 50% of the homes had taken price cuts. We’re nowhere near that bad right now. Price reductions are a leading indicator for where transaction prices will be in the future. They also lead where the new listings will land, especially next January when the 2023 market starts fresh. If price reductions hits say 45% or more, that will be a bearish signal for home prices next year. And sellers next year will know that, and start discounting a little when they list. So it’s something to keep our eyes on over the next 6 weeks or so. Especially if mortgage rates stay in the 6s. How quickly do we see the impact on home prices? We’ll watch it here. 

Single Family Home Rents Are Dropping

Finally, just a quick note we noticed and wanted to point out. We’ve measured three weeks in a row of declining rents on single family homes. These are small downticks just under 1% down from the summer’s peak. But rents have been so strong that it makes sense to pay attention. The inflation numbers are so high, driven in large part by high rents. The question is: Are we seeing the first signals of rents peaking? I don’t have insight about where rents may trend from here, but I am interested to see if we can watch how economic policy impacts the market in real time. Median rent for single family houses in the US this week ticked down to $2275. Something to keep an eye on.

So many variables to keep in view. The only thing we can do is watch the data and learn as quickly as possible where supply and demand leads us. If you have buyers and sellers looking for guidance right now, make sure you get them the data so they can see for themselves what is happening in your local market. Even in those most hard hit markets, we maybe can see the slide slowing. Your buyers and seller need to know that. Go to AltosResearch.com and sign up so you can get the data in your hands and in your clients hands today.

That’s all the data for this week. Back next Monday. See you then.