Housing inventory - how low can we go?

As the spring home buying market is almost upon us, the real question that we’re looking for in the data is not whether this boom is somehow ending, but rather how much more is it continuing to boom? The defining characteristic of this crazy real estate market has been record few homes for sale in the face of record high demand. That trend continues another week this week even as other financial markets are super volatile. Americans are still flocking to housing. 

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.

The news right now is that it’s a hot market already for the spring, and the economic risks, like rising rates or a falling stock market, have not yet derailed that eager American home buyers. 

I’m Mike Simonsen, I’m the CEO of Altos Research and this is what the data is telling us right now.

This week, yet again, we’ve set another new record low in available inventory of unsold homes on the market. Just 272,000 single family homes for the entire country. In normal markets, the end of January is the low point of inventory for the year.

By mid-to-late February, in normal years, inventory starts climbing. You get new listings coming on, but in normal years, you have fewer buyers while it’s still winter. You can see that pattern here in the data.

Last year at the end of January inventory was still falling a couple percent each week. Buyers were buying faster than new listings hit the market. Inventory didn’t stop falling until the end of April. That phenomenon is underway again this year. Available inventory declined by 1.9% this week. We had to adjust the y axis on the real estate inventory chart to allow for the lowest level ever. Based on the fact that inventory hasn’t slowed the weekly decline yet, it looks like we’re probably aiming at end of April again before we start to get a little inventory increase for the year. 

Speaking of that, next week on February 10 Thursday at 10am Pacific, we’ll have our monthly webinar. In it we’ll take an hour to deep dive into the data. One of the things we’ll cover is the forecast of inventory trends through the rest of the year. So if you’re trying to estimate how the market is going to go in 2022, the webinar next week is for you. Click to join us Thursday February 10 at 10am Pacific. We’ll include inventory forecasts for the rest of 2022.

Not surprisingly, the leading indicators for home prices are spiking too. In our price chart here we have two lines. The dark red line is the median price of homes on the market right now. At $375,000 this is unchanged from last week and continues to be up over 10% from last year. The more interesting story is the light red line here. The price of the newly listed properties is up 1.3% over last week. Remember that the price of the new listings reflects everything the sellers and the listing agents know about demand in their local markets. They know how many bidders were on the last sale, they know how many people were lining up for the open house down the street.

Because these are strong, they know they can increase the price on the new listing. We can see this spike very quickly this year. All the signs point to another year of 10-12% or more of home price gains for 2022. Even though there are economic trends that threaten to slow this home price boom, those trends are not anywhere in the data yet. 

If you follow the Altos Research data, you’ll know we’ve been tracking the immediate sales phenomenon for a year now. Immediate sales are the homes that get listed for sale and take offers and go into contract essentially immediately. This week nearly 25,000 of the new listings went into contract essentially immediately. A third of the market.

In recent weeks, we have an increasing proportion of the market going into contract immediately. This week it’s a third of the market 25,000 out of 75,000 new single family listings. Absolutely no signs of demand slowing whatsoever. 

We started tracking immediate sales a year ago. As a proportion of the sales, immediate sales is growing too. You can see the rapidly climbing sales rate in January. I actually think there’s more than just demand here allowing this number to increase. More participants sellers and buyers understand this is happening and therefore more are prepared for it. So the system is processing the offers and contracts more quickly. Last January, we were still in pandemic shock and this phenomenon was much more of a surprise.

27% of all the new contracts this week were immediate. 

In another bullish signal for future transaction prices, the percent of homes with price reductions has fallen below last year’s already crazy low level.

In Q1 and early Q2, we have the most new listings hitting the market. As they come on, they’re priced well and they don’t take a price cut. So the percentage falls. There are always some homes on the market with price reductions. Some were accidentally overpriced, some intentionally overpriced. They take a cut before they sell.

But when overbidding is common, fewer have to take a price cut. Right now we’re under 20%. Fewer price cuts now mean higher transaction prices when the sales close in a month or two.

The price reductions as a leading indicator is even stronger right now than last January, if that’s even possible. 

Finally today, days on market. Currently the median market time is 56 days. That includes homes that sat on the market over the slower holiday period. What’s wild is that this is the high point for the year. Market time only falls from here. You can see last year Days on Market was at 70 days to start the year.

Normal January is about 100 days. 3 months to sell your home. Right now the high end of the market in the US, these are roughly $1 million homes, is about 75-80 days. It takes longer to sell the more expensive stuff, but this is declining rapidly. This tells us that demand is across all price points around the country. It’s not isolated to just $300,000 or something. Across the market.

We’ll spend more time in the webinar next week looking at demand across price points. That webinar is Thursday February 10 at 10am Pacific. Click to register. We get a ton of participants in these webinars each month, so you should join us too.