The hardest position to take in analyzing the market is one that is contrarian and bullish. When everyone knows that the housing market is sluggish and weak, but the data shows surprising strength.
That’s where we are right now. Home sales are significantly better than they were last year at this time. And no one else is reporting it yet, because the traditional data takes so long to reach the headlines. But the fact is, as of this week, we count 14% more homes in the contract pending stage now than a year ago. These are homes that will generally close the transaction in November and December. So we’ll probably hear the headlines in December and January.
Another tricky part of communicating this is that home sales aren’t suddenly great. This isn’t a strong market, it’s just better than last year, when mortgage rates were hitting 8%.
Meanwhile, national home price signals had another positive week this week too. And inventory is past peak for the year, so the momentum looks to keep the trends in a positive direction... at least for now.
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 November 4, 2024. Please refer to the video below for all the charts I mention in this transcript!
Let’s start with supply today. There are 736,000 single family homes unsold on the market in the US. That’s a couple thousand fewer than last week. And down again from the peak two weeks ago. The unsold supply of homes on the market has now passed its peak for 2024. The inventory peak came a month earlier than in 2023.
There are 29.8% more homes on the market than last year. Remember in September we were at 40% more homes on the market and now we’re under 30%. That’s because in the fourth quarter 2023 the market was grinding to a halt. Mortgage rates were super high, inventory was building. The market is different now.
The market peaked with almost 740,000 single family homes unsold a few weeks ago. That was about 6% more than we had anticipated earlier in the year. We’d modeled that the peak would be more like 700k. That difference is really the impact of rates staying higher for longer all the way to September and higher rates create more inventory.
While the market peaked with more unsold inventory than we’d forecast, the seasonal decline is underway. This was not true last year. In this chart you can compare this year’s dark line to last year’s bright red line. You can also compare this year to previous years. In the last decade, we’d normally have 900,000 single family homes unsold on the market, and it’d be dropping quickly in November. One reason inventory can’t drop quickly this year is because so much of the country, like the midwest and northeast, don’t have very many homes on the market. We’ll review this in more depth next week in the webinar but places like Chicago have barely more homes unsold than during the pandemic. It’s hard for inventory in Chicago to fall for the holidays where there’s already no homes on the market.
It remains to be seen if this recent spike in the cost of money is going to reverse the supply trend. For whatever reason, the trend seems to be holding now. Remember the rule is that higher rates create more inventory and that will certainly be true as we roll into next spring if mortgages are still over 7%. Fingers crossed for more affordability in 2025.
There were just under 61,000 new listings unsold this week. That’s just a touch more than last week but 17% more than a year ago. When you include the 9400 immediate sales, the total is 13% more sellers than a year ago. Last year at this time the market was in deep retrenchment - both buyers and sellers were walking away. So the new listings volume last year was low and dropping. The market feels marginally healthier now.
And in fact, while it’s late in the year, you could say that the weekly new listings are in the Old Normal range now. Many years of the last decade there would be 60-70,000 new listings in a week in November. We’ll see if this trend continues, because consistently more sellers would signal a transition to new market dynamics from what we’ve lived through for three years now.
What we’re watching for is whether the dark line here, that’s this year stays elevated in the cluster of gray lines, through the end of the year. You can see the last few years are the lowest gray lines. We’ll get seasonal decline - fewer sellers each week as the year wanes, but if we continue in a path of 10-15% more sellers late in 2024, that would set up 2025 for some very interesting dynamics.
Now I shouldn’t oversell this trend. Maybe this year’s strong showing is just a reflection of the country finally getting some mellow weather. It’s really just one week. Sellers could dip again next week. But maybe it’s an early sign that we’re witnessing the slow erosion of the lock in effect? Are homeowners tired of waiting on the sidelines for conditions to improve? That’s what we want to keep watch for. In the chart, it’s the red line landing in the upper cluster of gray lines rather than the lower cluster.
On the demand side, the market showed a jump in new transactions just as it did a jump in new listings this week. We counted 63,000 new contracts started for single family homes this week. This may be evidence that activity is a bit of noise, some fluctuations caused maybe by hurricanes. People had deals to do, but they got delayed for a few weeks. The key with the newly pending home sales data is that we always keep our eyes open for conditions where sellers are climbing but buyers are not. And this week both sellers and buyers both accelerated.
There are now 354,000 single family homes in the contract pending stage, that’s the chart we’re showing here. Notice how this year’s line is now steadily above the last two years. We’ve been talking about how the fourth quarter is easy in comparison to the last two years. Those years were the worst times, and as I’ve said, this year feels like we are finally transitioning out of the worst times.
One thing that I find fascinating now is that even though mortgage rates have jumped back up close to 7%, we haven’t yet seen a slowdown in the sales volume. As rates rise and home prices stay elevated, mortgage payments for a typical buyer have inched back up close to the highs from a year ago. Affordability is getting worse right now, but we haven’t yet seen a correlated slow down in buyers. I don’t have a great explanation for why that is. Maybe buyers are just slow to respond to fast changes in mortgage markets.
Here’s another data point that emerges when we examine the pending home sales. In August the withdrawal rate - these are the listings that never got offers are not pending, and are no longer for sale - that withdrawal rate was higher than previous years. And it was one reason that inventory didn’t grow more quickly. If a seller is not happy with the market conditions and chooses not to sell, inventory goes down. Supply is limited. So in August we could see more withdrawals. But It no longer appears to be that way. Withdrawals were climbing in the fourth quarter 2022 and 2023, but they’re not climbing now. We’ll review withdrawals more closely in the webinar next week.
Let’s switch to home prices. I’ve shared recently how the median price of home in the US is staying resilient right now. And how that surprised me given the obviously weak first three quarters of the year. That chart we’re looking at here is the median price of the newly pending contracts for single family homes and you can see that resiliency. That price is $389,900 again this week. That’s unchanged from a week ago and is running 5-6% above home prices a year ago. Home price gains in the US are about 5-6% up over 2023.
Home price strength has been the most surprising development in the housing market this year. We’re looking at the national average of course. There are some regions where home prices are down. Any time I publish the data that shows home prices are up nationally, there’s always people in the comments sections pointing out that home prices in their neighborhood are crashing. That’s legitimate anecdotes to pay attention to.
Now, I’d argue that home prices aren’t “crashing” anywhere in the country. There are local markets where home prices have declined for the last two years and haven’t found a bottom yet. Some of these markets I’ve looked for signals of price upturns and don’t find them.
Price cuts dipped again this week. Fewer home sellers found the need to reduce their asking prices. The market is almost at the lowest level in two years in November. Like the other price measures, this is super surprising to me. 39.4% of the homes on the market have taken a price cut from their original list price. Next week we could have fewer price cuts than either of the last two years. At those times price cuts were still accelerating late into November as the market was weakening. This year is different.
We use price reductions as a leading indicator for future home sales. Here’s what this current trend says to me. I see a market that stayed frozen for much more of 2024 than anyone expected. Buyers waited on the side lines for cheaper money. That mortgage rate dip finally emerged like the groundhog seeing its shadow in September. That was enough to motivate some home buyers. We didn’t see that motivation when rates were at 6.5% but we did when rates fell closer to 6%. Then we also see some slow response time from buyers and sellers. So the price resiliency we see now is because we shook some demand free in September and early October.
But if that’s the case, then rolling into 2025, we’re currently positioned for weakness to start the year. What if we start 2025 with mortgage rates over 7%?
I think that’s the key. It’s wild how quickly the sentiment can change. As of now 2024 looks like home prices are holding firm nationally and inventory is peaked for the year, but what if economic news or the election drives mortgage rates back over 7%? So potential home buyers and sellers need to hear the data from you so they know how to act. If you need to advise people in the real estate market you should join us at Altos.
Go to AltosResearch.com and book time with our team to learn more.
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!