Homes are selling nearly 3x faster than pre-pandemic

For weeks I’ve been talking about rising mortgage rates and the possible impact on the housing market, but suddenly they’re not rising anymore. Perhaps until the fed actually starts selling some of their mortgage holdings, mortgage rates have been having trouble staying over 4% and meanwhile homebuyers are not stopping. There are no signs of slowdown anywhere in the data yet.

Speaking of rising rates, I interviewed Bloomberg columnist and money manager, Conor Sen on this week’s Top of Mind podcast. Conor is one of my favorite social and economic trendspotters. He shared his logic for why it’s hard to imagine mortgage rates rising past 4.5% this year. And if that’s the case, why there’s very little impact on housing demand.

If you haven’t yet subscribed to the Altos Top of Mind podcast - it’s where I interview the leaders and thinkers in real estate to put context beyond the data. Conor’s interview is a great example. I personally don’t have any ability to predict interest rates, so I’m looking to skilled economic forecasters to help us understand where rates might go this year. Conor and I talk about much more than just mortgage rates, things like how the supply chain crisis is maybe the bigger driver of the real estate market this year. Anyway - Top of Mind is the name of the podcast. Find it where you find your podcasts and also on the Altos YouTube channel.

Each 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. Traditional real estate data is released monthly, so by the time it gets to you it’s kinda old news. I’m Mike Simonsen, I’m the CEO of Altos Research. Let’s look at the data and see the details for the week of February 28 2022.

Available Real Estate Inventory

Let’s start with available inventory today. New week, new record low in available homes for sale. Just 244,000 single family homes on the market right now with another 80,000 or so listed this week. No signs yet of increasing inventory for the spring. Normal years inventory would be climbing by now. Last year the nadir of available inventory wasn’t until April 30. It looks like we’re aiming for a repeat of last year.

We're approaching the two-year anniversary of the onset of the pandemic. Just before the initial pandemic period we were at then-record low levels of available inventory at 724,000 homes on the market. But the market had already started its climb like normal years. We had four weeks of inventory climb in 2020 before all the rules changed.The question on everyones mind right now is "what’ll happen with rates rising this year?"

This is our model for how rising rates this year may impact inventory. Inventory climbed just a bit during 2018 as rates rose. This year is already different from 2018 because inventory is still falling 1.5% per week. In 2018 we’d already past the low point of inventory and it was already climbing. So maybe we end the year with 360,000 single family homes on the market. Off the record lows recently. Fingers crossed.

By the way - we have our monthly webinar next week March 10th at 10am Pacific. In our monthly webinars we take an hour to dive into all the data, spend more time on the forecasts and look at local markets too. If you need to figure out how to communicate to your clients about this spring’s crazy real estate market, you should join us. 

Median Home Price

Let’s look at prices. The median home price is surging quickly now for spring as expected. The median price of a single family home in the US this week is up 2% this week to $389,900. That’s almost 12% higher than last year at this time. A few other things I’d like to point out: Pre-pandemic price of $319,000. The initial pandemic had exactly 4 weeks of price decline before prices surpassed the previous high. 4 weeks. There were no price declines in that same period. Home prices were still several percent higher than the previous year. And that’s the likely scenario this year. Expect some increased inventory, but do not expect some sudden bargain prices. 2018 sure seems like a good guide here and the results of rising rates are pretty clear.

The price of the newly listed cohort is still shooting higher coming in at $398,900. The new listings are coming on the market priced well above the existing stock. Recall that the way these prices work into the system is that a house gets listed today, it gets an offer in March, it closes in April. So the new listings is a powerful leading indicator of where future transaction prices will be. Any given home may be over or under priced, but in aggregate, the sellers and the listing agents know exactly where to price to sell. When the new listings prices jump like this it’s because there are a ton of buyers and they’re bidding up everything that becomes available. The $400,000 price point will be psychological resistance to buyers and sellers, last year we got to $399,000 and then stopped. Will be fun to watch when prices break through that psychological barrier. You can see historical barriers like that in previous years when prices plateau for the whole summer. If you could price at $401 or $399 you tend to go under that threshold to maximize your bidders. So we’ll see when we break through.

Immediate Real Estate Sales

Immediate sales are our favorite indicator right now of that intense market demand. These are the homes that get listed, take offers and go into contract essentially immediately. If the market is cooling due to higher mortgage rates, we’ll see fewer immediate sales. However as of this week, immediate sales are growing in total number and as a percentage of the new listings. 75,000 new listings this week and 25,000 of them went into contract immediately.

How Fast are Homes Selling?

Finally this week let’s look at time to sell. The median market time always plummets this time of year. The best new inventory gets listed and goes quickly. This year is screaming fast, faster than last year. Last year there was still some junk on the market which skewed the median time higher. Now that stuff is all sold. The best time to sell a crappy home is in a hot market. We’re already down to 35 days. Last year was 55 at the end of February. And pre-pandemic was much more normal 85 days. In those times, some went quickly, there were immediate sales for sure, but far fewer. And some over priced or hard to sell homes lingered on the market. Which meant the median market time skews higher.

This is one easy way to see how our hot market is hot across all price points and all geographies. We have a few more months of the hottest spring market before things start to calm in the second half of the year. Like immediate sales and our price reductions measure, Days on Market is a very straight forward way to see how quickly rising rates cool demand. There is no cooling at all yet anywhere in the data.

OK - that’s the data for today. As I mentioned, the link to register for the Altos Research March webinar is in the description below. That webinar is Thursday March 10 at 10am Pacific. We get a ton of participants in these webinars each month, so you should join us too.

To get your own local Altos reports, branded for you so you can reach your clients, you just go to AltosResearch.com and book time with our team. Join us. See you next week.