Home Sellers Are Coming Back to the Market

New listings volume each week is now higher than at any time last year. And since it's still only April, there could be as many as eight more weeks of seller growth in the spring market.

There are two ways to interpret this trend. The bearish take is that there are way more sellers than buyers, and inventory is building, with mortgage rates at 7.5% and no signs of improvement anytime soon. That implies home prices decline in the near future. The more optimistic take is that more sellers will result in more sales, even if the imbalance of more sellers than buyers continues.

Or maybe both of these interpretations prove true. Because in addition to new listings, there were also more new contracts started this week than any week in 2023.

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I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of April 29, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

There are now 556,000 single family homes on the market. That’s up 2.4% on the week. Just over 13,000 more single family homes are on the market now than a week ago. Unsold inventory now is almost 32% more than last year at this time. And it is 90% more than in 2022. At that time in 2022 inventory was really jumping along with mortgage rates; That’s not what we have now. Now we have steady increases. This is how I like to illustrate that consumers are more sensitive to changes in rates than to the absolute levels. Rates are higher now, so unsold inventory is higher. But two years ago rates were climbing like 20 basis points each week all spring. Rates were climbing rapidly and so was inventory. Now the increase in both of those lines is slower. 

In the inventory chart, see the light red line from 2022 was near the very bottom - record few unsold homes on the market, but climbing rapidly - at that time we were adding 18 or 20,000 homes each week unsold. Now we’re adding 13,000. While interest rates are climbing now and inventory is building, two years ago, rates were really moving quickly and inventory was building much more quickly. The change in rates is what drives change in behavior.

New Listings

There were 72,000 single family new listings unsold this week with another 21,000 which were newly listed and are already in contract what we call the immediate sales - for a total of 93,000 new sellers this week. That’s much more than any week in the entire year last year. You have to go back to July of 2022 to find this much seller activity in a given week. 

So, why is the seller volume increasing? Where is it coming from? Is it time to panic? 
First keep in mind that the immediate sales are still at a reasonably healthy level. Meaning plenty of homes get offers and go into contract immediately upon listing. 21,000 this week. 22.5% of the market. 

Next, keep in mind that each week there are still 20% fewer sellers than there would be in a “normal” year pre-pandemic. There are not a lot of sellers. It’s just that in the last decade as mortgage rates fell, we started hoarding more real estate and selling less.  You can see the relative levels of weekly new listings in this chart. This year’s dark line is pushing above last year’s light red line. The gray lines are years past and seller volume still runs pretty low because homeowners have such a good deal they don’t want to sell. 

Fixed mortgage rates mean fixed costs for most homeowners. Fixed costs mean I don’t ever have to sell. But in areas where costs can rise - for example due to high property taxes or spiking insurance, or other maintenance costs - those are homes that are more likely to hit the resale market. Right now this is most obviously Texas and Florida. 40% of the inventory increase over last year has come from Florida and Texas. These two states have 29% of the country’s active listings for 16% of the population. So outsized gains are happening here. And you can imagine if you have a second home in Southwest Florida, that you use only occasionally and your insurance costs tripled this year, it’s very tempting to choose to resell that. Some people are doing so.

The opposite market is happening in New York. New York has the fewest homes available per capita right now. That dubious distinction is usually reserved for California. New York still has just slightly fewer homes available on the market than last year. Where Florida now has 59% more. 

The takeaway here is: Inventory gains are pretty much everywhere, but significantly more in the south from Florida - through Texas and over to Arizona.

Pendings

There are 398,000 single family homes in contract now. That’s the Pendings count. It’s a few percent more than last year at this time. These homes are in contract pending stage and they’ll close mostly in May. Just slight seller growth. This very slow expansion hasn’t receded yet even with April’s jump in mortgage rates. I frankly have been expecting that pace to reverse, but we haven’t seen it yet. This week the comparison vs last year expanded just a bit more.

Notice in the total pendings chart how 2022 sales dwindled in the second half of the year and haven’t recovered yet. In this chart each line is a year. 2022 is the light red line. It really illustrates how quickly home sales slowed as mortgage rates jumped - especially in June and September. 

The dark line is for 2024 and the trajectory is surprisingly staying positive. 

As rates now jumped from 7 to 7.5% I’ve been expecting that slowdown to happen again. Perhaps though if we get lucky and don’t see rates climb into the 8s, then maybe our sales rate will continue to slowly recover just a bit by later this summer. Rates could keep climbing though! The macro data sure keeps coming in strong. We’ll just have to watch it as it happens.

But as of right now there were 76,000 new contracts started this week for single family homes in the US. That’s more sales than any week in 2023. It’s good growth. 9% more than the same week a year ago. Sales volume typically peaks at the end of June, so we have hopefully more growth to continue with this spring market. And the weekly new pendings count is already ahead of the best weeks a year ago.

Home Prices

The median price of those homes in contract is now just over $399,900. That’s 5% above last year at this time. What we’re tracking here is the final ask price for the homes that went into contract. This is the earliest proxy for the final sales price. Any given home may sell above or below asking but in aggregate the sales price is very close to this price of the pendings. 

We watch several measures of home prices here at Altos. There’s all the asking prices, what you’ll see if you walk into the market today. The median price of all the homes on the market right now is just under $445,000 and is only 1% above last year. The price of the new listings is the most leading indicator, and there is the price of the set that is being purchased, which is what we’re looking at here. These are all useful indicators of home prices. In this chart you can see for example precisely when home prices fell in 2022 in June and again in September. At that time we had big jumps in seller inventory coupled with sudden additional spikes in mortgage rates. So home buyers adjusted their purchase expectations and prices dropped. I’ve highlighted in gray the weeks in 2022 when home prices dropped. I keep on the alert for those price changes now as well. We haven’t seen them yet, but we’re on the lookout.

Price Reductions

As we’re on the watch for leading indicators for changes in home sales prices, we saw a meaningful uptick in price reductions this week. 32.5% of the homes on the market have had price cuts. That’s up 50 basis points from last week. And is 340 basis points more than last year at this time. This week last year was the last of the decline of the season. Pricing was much firmer last year. This year price cuts have been increasing for10 weeks. It’s a much slower pricing season than last year. It’s spring, this is when the most upward pressure on home prices happens typically.

But price cuts are on the rise. The curve this year is following a very clear seasonal trend. Home prices are not crashing. And there’s no signal anywhere in the data of price crashes imminent. But there are more homes with price cuts now than in any recent April, so that’s a pretty weak signal. In this Price Reductions chart notice how this year’s curve is elevated above any recent year. There are more homes on the market now with price cuts than in any April in overa decade. Even though it’s not climbing nearly as quickly as it did two years ago when the market changed.

If you look at the local data, you’ll see that it’s the Florida markets which dominate the price cutting right now. Over 50% of the homes on the market in most of the major Florida metros have had price cuts. Inventory is up and home prices are lower than last year at this time.  Nationally though, the data is balanced out by many markets like the Northeast with still very low inventory 

If mortgage rates keep climbing, we could see the US with over 40% price cuts by late summer. That would be a pretty likely negative indicator for future sales prices. Negative meaning home price declines. As of now, as I mentioned earlier, home prices are higher than they were a year ago. 1-5% depending on which measure you use. But the price reductions trend seems like it is poised to slow down. It looks to me like 2024 will be flat at best for home prices. Though I was surprised in 2023 so we’ll see if I get surprised again as this year unfolds.

That’s why we do this data work each week. This market is trying to grow, but homebuyers are obviously sensitive to the cost of money. If you aren’t watching the data each week, you’re probably behind the curve. You have buyers and sellers who have no idea how this market is changing right now. They need to hear the data from you. If you need to help buyers and sellers see the actual data, you should join us at Altos.

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