Home Sales Are Growing, Prices Will Stay Flat

It was a pretty strong week for all the housing numbers. New supply and sales numbers keep climbing weekly and compared to last year. Price numbers had a slight increase this week across the board.

As the data comes in each week, I’ve been more optimistic about home sales volume growth than for home price growth for the year. Specifically, when inventory is 25% greater than a year ago, the supply/demand balance is obviously very different than it has been. And that implies softness for future sales prices. So while we can see current home sales prices holding up, the signals for the end of 2024 and into 2025 seem like we’re heading for flat home prices.

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 March 25, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

Available inventory of unsold homes continued its climb for the spring season this week. There are now 513,000 single family homes unsold on the market. That’s 1.1% more than last week and 24% more than a year ago. Last year inventory was still declining in March. Now it’s on the rise.

In 2022, two years ago, this was the moment that mortgage rates started climbing dramatically. And inventory was also spiking, in fact at that time unsold inventory was climbing much faster than it is now. Inventory is 102% more than in March of 2022, but that gap is closing because demand slowed so quickly at that time. By July we’ll have only 25% more homes on the market now than in 2022. But we’ll have maybe 40% more than last year. 

In this chart each line is a year of available inventory. These are homes on the market, unsold. The light red line is from two years ago. Exactly at the moment that rates started climbing, so did inventory. 

You can also see 2020 here. Four years ago at the end of March was the start of the pandemic and mortgage rates started falling very quickly. Inventory fell surprisingly quickly then too. 
See also how 2018 finished with more inventory than 2017? 2018 was a year of rising mortgage rates too. 

Inventory will cross over 2020 levels by July. We’ll finish the year with over 600,000 homes on the market. Unless rates reverse and fall from here quickly. 

Three takeaways from the inventory data now:

1. Growing inventory this year means more sales can happen. More sellers means more sales will happen.

2. Year over year inventory growth points to weaker demand and is one of the signals that home prices won’t climb this year. We currently have 24% more homes on the market than a year ago.

3. The longer rates stay higher, the more inventory will grow back closer to the old levels. If you’re a home buyer and you’re waiting for mortgage rates to fall before you swoop in for a deal. Recognize that lower rates, even slightly lower, like 6.5%, will spur demand more than supply so inventory will start falling and selection and competition will be worse, unfortunately.

New Listings

Each week this spring we’ve been tracking the new listings volume. We want to know how many sellers are coming into this market. We want to know if there will continue to be more sellers than last year. We also want to know if that rate is growing too quickly. If a truly bearish scenario for home prices were to emerge, one element is that we’d see this supply growing much faster than demand.

On the other hand, last year had very few sellers, and that was one reason we had so few home sales, we were supply constrained. So we’re watching the new listings count each week now. We want growth in this number. More home sellers means a more healthy housing market. We want more selection, we want greater supply to help combat the affordability crisis we’ve created in this country. 

And what do we see? This week saw just over 60,000 new listings add to inventory with another 17,000 new listings / immediate sales. In total new listings is 14% more than last year. 14% more sellers definitely means more sales can happen in April than closed in April of last year when we were so supply constrained. 

In this chart each line is a year. See how the dark line for this year keeps growing over 2023. This seems like all good news to me. There’s not a lot of sellers, so there’s very little chance of supply and demand imbalance. But there are slowly, steadily more sellers each week. 

The gray lines are years past. A year with 5.5 to 6 million home sales would need probably 80,000 new listings of single family homes right now. And we have 60,000 so there simply aren’t enough homes for sale to hit the big sales numbers, but the lid is being lifted. We can see obvious growth.

Pending Sales

And as supply increases, the rate of sales is starting to pick up compared to a year ago. We can measure home sales in real time by tracking all the homes that moved to contract pending status this week. These “pendings” aren’t yet sold. They’ll spend 30 or 40 days in contract and the sales will mostly close in April or May.

There were 67,000 new contracts for single family homes this week compared to only 62,000 in the same week last year. There were another 15,000 condos into contract. This annualizes to only 4.3 million home sales, without any seasonal adjustment. So obviously the rate of sales is still pretty slow, which makes sense given the high mortgage rates. But the sales rate is climbing. More sales versus last week and more sales than a year ago. The rate of new contracts is 8% more than last year but still 15% fewer than March of 2022, when buyers were desperately trying to get their deals done as rates were rising.

At the far left end of this chart, you can see how the new contracts rate for 2024 started higher than the previous year, and at that time, early January, I was optimistic about home sales growth for the year. That's at the very left end of the chart. The dark line is this year’s new sales rate. Then mortgage rates rose pretty substantially in January, February and into March and that sales rate definitely slowed. We’re in a trend pattern now that looks to me like it’s going to stick finally. It looks like April will see decent home sales growth over 2023. But won’t overtake 2022 sales volumes probably until after July of this year. July of 2022 was when supply and demand fell precipitously. If mortgage rates stay stabilized in the upper 6s these trends look durable to me.  

Keep in mind that we can see the April data now, and those headlines won’t be visible for a while from the traditional sources. April is looking good for home sales growth.

Home Prices

We’ve been looking so far at the cautious future price indicators in the data, but in fact this week all the current price measures actually had pretty healthy gains. When we look at all the homes on the market, the median price is now $439,000. That is up a fraction this week and just a little bit higher than last year. Home prices climb this time of year to peak in June as the best inventory, the most new listings, and the best demand is in the market. This week’s price increase is right in the normal range for the end of March. 

The price of the new listings took a healthy jump this week, up 1% to $424,900. That’s nearly 4% higher than a year ago. It’s also to be expected that the price of new listings each week in the spring will be higher.  There is no signal of big home price changes in this leading indicator. But it’s nice that this move is up. Four years ago in March 2022, we were at the start of the pandemic lockdown and we could see the price of the new listings drop very quickly. That price decline only lasted for three weeks though. And the price of the new listings was one of the important factors that showed us very quickly how there would be no housing crash as a result of the crisis.

In this chart we can see the slope of the line at the far right end is not super steep. So we can see that prices are climbing for the spring, but they’re not climbing quickly. That tells us that we’re not growing price appreciation over last year. 

The price of the homes going into contract across the country are holding up as well, and also not accelerating.  The median price of the new contracts this week was $389,900. That's up a fraction from last week and 4% more than a year ago. Home prices peaked in May of 2022 and didn’t surpass that during last year’s spring season. I expect we’ll hit new all time highs for home prices in the next month or so, assuming these current trends hold.    

Price Reductions

So most of the signals in the data this week were pretty optimistic. If there is one factor to temper than optimism, it’s the price reductions. The percent of homes on the market with price cuts from their original list price ticked up to 31.4% this week. There are more homes on the market now that have felt the need to reduce asking prices than there were a year ago. Last year’s market strength in Q1 and Q2 led to 5% home price growth for the full year of 2023. We have less strength in pricing now than we did last year. 

While price reductions are in the “normal” range, they are higher now than any March in many years. There are more sellers now who have reduced the asking prices on their homes than in any March in over a decade. This last decade was a very strong one for home buyer demand, so we haven’t seen a “normal” market in a very long time. 

This is a signal to pay attention to. It’s hard to see how nationally home prices will grow this year under these circumstances. We can see buyers in the market, but there is no signal of them pushing home prices higher. Sellers who over price are being forced to reduce. 

When we look at the price reductions chart, the line for 2024 has turned the corner and started climbing. Compare this year’s dark line to two years ago when the market was turning quickly. At the time in March 2022, there were still very few overall with price reductions, but that was changing rapidly. The slope started to climb very quickly, especially in April and May of that year. 2022 peaked in November with 43% of the homes on the market needing price cuts. That November peak corresponded to home sales price declines 4-6 months later. And that’s why this data is worth watching so closely. These price cuts tell us about demand now which turns into sales several months down the road. 

We can see home buyers are very sensitive to mortgage rate moves. We can see the price reductions data adjust exactly in the moments that mortgage rates jump higher. 

These are pivotal weeks for the housing market. There are home buyers and sellers sitting on the sidelines waiting for conditions to improve. And meanwhile mortgage rates are actually rising, so conditions may not be improving. If potential sellers knew the data, would they act differently?

Get these market insights for your local market by going to AltosResearch.com and booking time with our team.

You can also run a free Altos real estate market report for any zip code in the U.S. and receive an update on that area in your inbox every week.

And, if you want to learn how to read and interpret all the stats in the report, I encourage you to download our free eBook: "How to Use Market Data to Build Your Real Estate Business."

See you next week!