Housing Market Pauses for the Election

Overall this was a much slower week for the housing market than recent weeks have been. Inventory, new listings, sales, and prices all dipped this week. The autumn seasonal decline is upon us. We had a big crazy week with the election and that obviously delayed some listing and sales activity, plus we’ve had spiking mortgage rates.
It’s actually not uncommon for housing activity to dip for the first week of November and rebound a bit in the following week. And given the confluence of trends right now, I do expect inventory and new listings to rebound up again before the end of the month.

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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 November 11, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

I’ve said this many times, but rising interest rates creates rising inventory. Rising rates slows demand for homes and when demand slows, inventory grows. This has been true all year long, starting in the fourth quarter of 2023. At that time mortgage rates rose from 6.5% to 8% and inventory spiked. Those high rates and rising inventory trends persisted for most of 2024 with only a little reprieve in September this year.

But we’re also at the seasonal decline time for the housing market. It’s really hard for inventory to climb past Thanksgiving. But we have two more weeks where I expect more inventory of unsold homes on the market.

But this week, unsold available single family home inventory around the country declined by nearly 2 percent to 722,000.  As the election week delayed a bunch of new listings, on top of a few sales completing, and what seems like a fairly high number of withdrawn listings - these all  coincided and the total homes on the market declined. Any new listings delayed are now listed and that’s why we’ll see an inventory rebound next week. 722,000 now and I’m expecting 728,000 or so next week. People only delayed listing for a few days, and buying conditions are worse than they have been recently. 

As of now there are 28% more homes on the market than a year ago. Inventory was still growing each week in November of 2023. Remember that 2024 inventory had been as much as 40% above 2023, and now it’s 28%. When we compare to 2019, there are 20% fewer homes unsold on the market now across the country than in 2019. The gap with the pre pandemic era is closing.

New Listings

We counted 49,000 new listings of single family homes this week, which was a big decline from recent trends. That’s probably like I said, just a one-week dip due to the election and as I mentioned, I expect a bit of a rebound next week back to maybe 55,000 or so. But for this week, that new listings count was down like 20% in a week. And there were fewer new sellers this week than last year for the first time in a while. While it’s a notable week, it’s just one week and will bounce back. This is not suddenly a trend of dramatically fewer sellers. We have two full more weeks before Thanksgiving and it’ll be in December before we see the big dips for the holidays. 

In the chart here you can see the pattern in the gray lines from previous years at the right end of the chart, the big dips in activity that come for Thanksgiving and the Christmas / New Year’s weeks. The red line from this year has been moving slowly from the pandemic lows to the old normal levels. This week’s big dip notwithstanding.

We’re now looking into 2025, with expectations of continued growth in the seller volume. More sellers and greater inventory is a trend for 2025. Keep your eyes open for that. If home sales are going to grow in 2025, the red line will have to start trending higher rather than lower, starting in January. I expect that growth, I don’t expect a flood with too many sellers. The growth in sellers comes because we’re now finishing three full years of elevated mortgage rates and the longer we go, the more homeowners feel compelled to sell. So sales activity and inventory should continue to climb next year. Especially with the recent upward trend of the cost of money. 

New Pendings

On to the sales volume metrics. The sales rates dipped along with the new supply rate this week. We’re looking at the newly pending contracts here. We counted 51,000 new sales started this week for single family homes plus another 10,000 condo sales contracts. That pace is down notably from a week earlier. And in fact we counted 2% fewer sales started this week than the same week last year. 

Like new listings seller numbers, home sales - the transaction counts - have been slowly running above the previous two years. I’m not sure it does justice to illustrate this week’s big dip which is likely due to an unusual event like the election. So in this chart we’ve illustrated the recent average trend to smooth out some of the weekly noise in the sales rates. This is using a 4 week rolling average of the newly pending home sales.  The recent average is 58,000 single family home sales started each week. That’s averaging 10% more than recent years in November. One poor showing breaks our 10-week streak of Year-over-year home sales growth, but it doesn’t yet reverse the trend. 

On the other hand, with mortgage rates shooting up, maybe this autumn is shifting back into low sales mode. We’ve been disappointed with head fake recoveries a bunch of times over the last three years. A reversal of our sales growth trend is not off the table. While I still expect a rebound in the new pendings count for this week of November 10, If we don’t get one, that will be a clear signal from home buyers. Stay tuned.

Home Prices

Home prices dipped with the market activity in the election week also. The median price of single family homes that started contracts this week - those 49,000 newly pending sales - dropped a couple percent this week. Like inventory and sale volume, I expect a rebound in the price next week. Still by this measure even including the big dip this week, home prices are 4% above last year at this time at $380,000. 

Like I said, I expect prices to rebound next week a bit with the bigger volume, but if that doesn’t happen, that’d also be a signal that this quarter’s steep jump in mortgage rates are taking their toll on home buyer demand. 

You can see the recent sales price trends in the chart here. This is tracking the median price for all the homes that go into contract in a given week. Those new pendings are sales that will complete in 30 or 40 days. So watching this you get the earliest proxy for sales in the future. You can see this year’s dark line has stayed elevated compared to the last two years since August. You can see this week’s dip, and why I expect a bit of a bump back up next week. We’re comparing home sales coming in at $380,000 now versus $360 or $3650,000 a year ago. If demand falls off, it could be that prices settle down lower closer to last year. That would be an abrupt change from the trend of the last few months. It’s not out of the question, so we’ll keep watching for that potentiality.

Price Reductions

So while home prices ticked down this week, it’s probably due to the lower activity week overall. One way to check that assumption is to look at the price reductions levels. If sellers are accelerating their price cuts that would be a weakening signal. But in fact price reductions ticked fewer this week again. 

We’re down to 38.8% of the homes on the market with price cuts. That’s fewer than last week and fewer than last year. We use price reductions as a leading indicator of future sales prices. While 38.8% is still more than normal which tells us what we already know and that is that demand for homes is still weak, the trend nationally is for fewer price reductions this fall. Recently as homes have sold or been withdrawn from the market the percent of listings that have taken price cuts from the original list price is ticking lower. 

This tells us that the current expectations of buyers are sellers are lining up for continued price resiliency in 2025. There aren’t any signals in the data that show home prices falling dramatically. 

That means as we look into 2025, it seems like we’re lined up for another year where affordability stays very difficult.  When you focus on affordability specifically, it’s hard to imagine how home prices can stay elevated. Home buyers are stretched and as long as price stay high, demand will be limited. There are some forecasters who use affordability as a guide for assuming home prices will fall in 2025 and 2026. At HousingWire we’re about to publish our 2025 housing market forecast paper which covers all these perspectives. And details our expectations for the year in home sales and home prices.

If home prices are going to adjust down in 2025 a few things will have to happen. We’d have to see sellers piling up. Which we don’t, really. We saw some inventory build in the first half of the year, but prices stayed more resilient than I expected. 

Then once inventory builds and if the weekly seller volume falls, we should also see a rise in price reductions. Again, earlier in the year, particularly in the June - July period, it looked like that downward price momentum was forming.  You can see here at that time the dark line of price reductions was above any recent year. And in fact, home price appreciation slowed, but didn’t drop. That means right now as the price cuts curve trends lower, the signals are pointing to continued resistance to lower home prices. 

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