We’ve turned the corner of the new year with probably the lowest inventory week for all of 2023. During the pandemic, inventory kept falling during January, February, and March as demand dramatically exceeded new supply.
This year we’re getting back to normal behavior, new listings start hitting the market just after the first of the year. Some listings that were withdrawn over the holidays are back, many with lower prices. Since demand is significantly lower than the last few Januarys, we should see inventory rising starting next week. And definitely rising later in the month.
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I’m Mike Simonsen, I’m the founder of Altos Research. Here’s what the data looks like for the first week of January 2023.
The median price of single family homes on the market across the country fell by just over 1% this week to $405,000. I expect prices will rebound with the new inventory in a couple weeks. This price rebound happens every year.
And because affordability is still dramatically reduced with mortgage rates well over 6%, the thing I’m watching for is how small or big the bounce in prices gets this month. It’d be very bearish if home prices keep falling weekly like they have since May.
As of right now, the signals look like we’ll have a small seasonal price increase in the next few weeks.
The median price of the newly listed homes took its annual Christmas/New Year’s week dip and will rebound in next week’s data. This is somewhat impacted by the fact that New Years fell over the weekend. We’ll get some new listings this week and maybe more in next week’s data. So we might have two weeks of the January rebound.
Buyers have significantly more selection than they’ve had in several years, though we ended 2022 with fewer than 500,000 single family homes on the market. Back in June, inventory was climbing so quickly it looked like we might have significantly higher inventory to start this year.
There are indeed 67% more homes on the market right now than when we started last year. Last year, buyers were grabbing everything they could while money was still cheap. At 490,000 homes, though, it’s still 39% fewer than the start of 2020 before the pandemic hit. At that time, there were 782,000 homes on the market to start the year.
I’ve talked about this in our monthly webinars, which is that some of the country, the midwest and northeast, is still very low inventory, and the biggest boom markets like Phoenix and Austin now have more inventory than they did pre-pandemic. So this spring is playing out to be very different depending on your local market.
Meanwhile there are only 251,000 single-family homes in the contract pending stage. That’s 35% fewer than last year. The pendings announcements from the National Association of Realtors are going to continue to be shockingly low for the next couple months. And that means the sales volume will be very low too. These homes in contract are transactions that will close in January or February and visible in March. All those headline numbers will be very low.
The pendings data will take a few weeks longer than the active market to rebound, but will start climbing later in the month. Only 30,000 new pendings this week, which is low as you’d expect over the holidays, and is also a third lower than last year at this time. The light red portion of each bar is the new pendings each week. The total bar is the total count of those homes in contract in the given week. You can see how low compared to last year. The dip in the middle of this chart is New Years week 2022.
Some 38% of the homes on the market have had a price cut in the last few months. The market is a lot slower than recent years. Price reductions will continue to decline as fresh inventory gets listed in the next couple months.
If price reductions nationally get under 35%, that’ll be a pretty normal range and a signal that buyers are finding some ability to buy. Price reductions have been very local too, so we’ll want to watch the hardest hit markets to see if those cities whose price reductions have been over 60% stay there, or if they come down too.
Many of these markets have been the epicenter of investor buying during the cheap money era, and those investors have stopped abruptly. We’ll watch for signs of buying resuming in the next few weeks. At 6.5% mortgage rates, it seems like those buyers will hold off for now.
I also wanted to share some rental data. Rents have been ticking down with home prices since the summer peak. The median rent for single family homes across the U.S. is $2,175. That’s up from last year, when rents were still jumping quickly. With economy fears, fewer people are forming households, so the demand is lower on rental units as well as for purchases. Hopefully soon the inflation numbers catch up to reality and the housing inflation portion of the Consumer Price Index (CPI) starts to subside.
This is of course national data and the local markets are behaving very differently from each other right now. If you need to get your local data to your buyers and sellers right now, you should join us at Altos Research. Go to AltosResearch.com book a consult with our team to learn how to interpret this crazy market for the people who need it most right now. They need you to be the expert for them.
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See you next week!