The rate of home sales is picking up, especially compared to last year at this time. The number of homes in contract across the country has risen for the last few weeks. Purchase mortgage applications are up for five weeks in a row. It seems like mortgage rates getting closer to 6% is starting to shake loose a few transactions.
These are small moves, and it’s early. It’s not a big rush of home sales. But we're finally starting to see some movement. In today's video, we’ll look at the latest pending home sales data and also the pricing data where we can see a tiny heartbeat of home buyer activity.
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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 September 30, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are 362,000 single family homes in contract. That’s been climbing all September from 357,000 earlier in the month. It was just under 1% increase this week and we compare that to last year and 2022 when home sales were falling by 1% per week. This is measuring the total count of homes that are in contract now. We’re showing 6% more homes in contract now than last year.
Homes stay in contract for 30-40 days. At the end of the month a bunch of sales close so next week will have more sales completed and fewer homes still in contract. There’s a step down each month for the first week of the month. So next week, we’ll start October with fewer sales still in the process. There are 362,000 single family homes in contract now, next week will have maybe 350,000 as a bunch of sales will have closed.
That’s the total homes in contract. When homes are taking offers faster than the sales are closing, that pending count climbs which is what we’ve had in September. So when we look at the new contracts pace, the homes that took offers and went into pending status this week, we want to know if that pace is heading up or down. And in fact, that pace of new contracts pending ticked up 1% this week to 63,000 single family homes. With another 12,000 condo sales underway.
We’re showing this New Pendings data here. New Pendings are up 1% for the week and this week saw 11% more contracts started than last year at this time. So 11% more offers this week than last year. In fact this week there were more sales started than either of the last two years. Remember that was when mortgage rates were spiking in the fall of 2022 and 2023. The brakes were on hard for the fourth quarter. So the comparison, while we don’t have a lot of sales now, is definitely more than either of the last two years. You can see the lines from 2022 and 2023 tanking at the end of September.
So the weekly ticked up from last week, that’s a good sign. The comparison against last year is getting very easy now, so we should continue to show year over year home sales gains for the whole fourth quarter. In this view of the weekly new contracts pending you can see the dark line at the right end of the chart is definitely coming in above the last two years. See the steep drop in the 2022 line. These comparisons are now easy. It’s the fall, so sales won’t continue to climb week over week, but if we continue this relative strength you’re going to start to hear the headline shift positive. This is the evidence that the consumer is reacting just a little bit to cheaper mortgage rates. I’ve been pointing to this moment for several weeks and it just hit. Now the question is does the momentum keep up into the first quarter of next year. That’s when it’ll really count.
Inventory has been climbing too. Last year at this time people who were expecting mortgage rates to fall in 2024 would ask me if falling mortgage rates would potentially lead to a lot of pent up sellers in 2024 who would perhaps flood the market with listings, which might be imbalanced with buyers and lead to a price correction. Remember that fear from back then? At the time it seemed very clear to me that if rates fell in 2024 inventory would fall also. If rates rose inventory would rise. So that fear was indeed misplaced. And it turned out - rates rose or stayed high all the way into the third quarter 2024. And inventory rose that whole time too.
So now rates are falling. They’re past their peak. What’s going to happen with inventory? Inventory is still rising right now. It’s not super late in the year for the supply of unsold homes to keep climbing. But it could be that we are maybe seeing lower rates shaking loose sellers who have been sitting on the fence for two years. I think we’re probably seeing investors in the big investor markets like central Florida and Texas maybe looking to unload some underperforming assets. Those states which had appeared to have topped out with inventory a few weeks ago have supply re-increasing and sales rates are inching up too. It’s not just inventory dumped on the market. More homes for sale means more home sales can happen.
We had hurricane Helene which disrupted a big chunk of the country, so next week, I’m looking for declines in inventory and new listings. Florida, Tennessee, Georgia, North Carolina. It can sometimes be surprisingly difficult to see the immediate impacts of natural disasters, but this was a big one so we’ll track that. It wouldn’t surprise me to have inventory knocked down a couple percent next week and that’ll throw a wrench in all our forecasting models. We’ll keep watch on that.
There were 63,000 new listings unsold this week. With another 9,400 immediate sales. Not a lot, but a slightly healthier pace than last year. I chatted with an Atlanta broker this week who mentioned they’ve suddenly had a few multiple offer scenarios on the best listings, which hasn’t been happening for this year. The immediate sales rate as a percent of inventory is still as low as it has been since we started tracking during the pandemic frenzy. So that number doesn’t show any broad gains in demand, despite that anecdote. But it’s something to keep watching.
In total there were 6% more sellers this year than last. That’s in the range it has been all year. It’s not a flood of sellers and we really still want to see more sellers. We want to see continued growth in the listing volume. That means more selection for buyers and ultimately more sales;.
New listings count dropped this week from last. I mentioned last week that I expected it to do so. In this chart you can see this year’s line is generally fewer sellers than in years prior, except for 2023. We’ve talked about how the market was shutting down hard so sellers were running away. So what I believe is a “healthier” market requires growing new listings, and it has been. 5 or maybe 10% more sellers each week than a year prior.
At the same time, as I’ve mentioned, I’m always on the lookout for conditions that get imbalanced. So if for example that fear that lower rates will shake loose a bunch of pent up seller supply, maybe too much, and that forces prices to plummet - that’s the fear. If that were to happen we’d see it in this new listings line, it would have to start climbing above the gray lines of years past. We don’t see that. What we see is healthy market growth. Dare I call it healthy? Healthier maybe is a relative? Back from the dead?
Whatever the label, we’ll see gradually fewer sellers this fall, and it’ll be interesting if we have any relative upward trend compared to the last two years. Mortgage rates have moved sideways for a couple weeks now, but what if they drop into the 5s? That’s worth watching here. We’re going to watch how supply reacts as well as watching demand react to the newly lower mortgage rates.
Home prices are also holding up. I mentioned this last week. Basically all the measures of home prices are showing just slightly positive gains for the year. Up 2 or 3%. None of the price measures are showing big strength, obviously. In fact they’re all the weakest they’ve been in 5 or more years. But they’re up.
Prices stayed resilient through the weakest demand times in this market this year. Now with these lower mortgage rates - and as I’ve been showing what look like green shoots of buyer demand - it seems unlikely that home prices will face renewed downward pressure. For buyers right now it’s slightly improved demand for homes at the prices the market is currently asking.
For me that implies the scenario where home buyers have been sitting on the sidelines waiting for a big price correction is unlikely to materialize. We don’t see price declines anywhere in the data. Now since rates are down and we’re past the peak pricing time of year, mortgage payments on a home you buy today are 10% cheaper than they were last year at this time. Payments are 14% cheaper than the worst point in May of this year. Payments are down, home prices are not.
Those same payments are 53% higher than they were at the cheapest moment during the pandemic, nobody is fooled into thinking these homes are bargains, but they’re 14% off the peak and let’s take every improvement we can get, it helps home buyers.
The median price of all the homes on the market is $443,000 right now. That’s down a tick from last week and is about 1% more than last year at this time.
The median price of the newly pending contracts - remember there were more contracts this week, this is the price point people are buying - actually ticked up for the third week in a row to just under $390,000 - just a tiny bit. This is the view we have here. This is the median price of the newly pending contracts. These contracts are staying in the 3-4% greater than last year range. And that’s roughly where we’ll end the year. Home prices up maybe 3% over 2023.
I don’t see any evidence of dropping further but also I certainly don’t expect conditions to create any opportunity for homes prices to jump meaningfully at least not until the spring. That’s a long way off though. In fact you can easily imagine how that stays true for another year.
And we wrap today with the leading indicator for home prices, that’s the percent of homes on the market with price reductions. This percentage has been hovering about 40% for several weeks now. There’s been a bit of a cap on price cuts between discouraged sellers withdrawing listings and with just marginally more offers being made for purchase.
Here’s what I’m looking for next with the price reductions: see the curve here for 2024 is now fewer price cuts than in 2022. That period in 2022 led to year over year home price declines in the spring of 2023. 4-6 month lead time. If because we have a few more buyers this autumn, if that leads to an earlier peak in the price cuts season - what I’m watching for is whether this year’s curve trends under 39% in October, and finishes the year under 36.3%. That would be 36.3% of the active listings at the end of the year had taken price cuts from the original list price. If it comes in fewer than the red line from last year, that would set 2025 up for more likely home price appreciation than we had this year.
This leading indicator is like the other price measures. None of it is pointing lower. Is all flat. It’s less annual price appreciation than we used to get in the pre-pandemic era. In this post-pandemic era, we’re much more likely to tread water on home prices for another year or more.
The big trends from earlier in the year are shifting now. And that’s why we do this data work each week. If sellers finally change their expectations, we’ll see it in the data quickly. Maybe mortgage rates have finally turned the corner? For buyers and sellers, these conditions can change fast and it can be very impactful for smart decision making. They need to hear the data from you so they know how to act. You should join us at Altos.
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