Available inventory of unsold homes is building each week now. Are these signs the market is slowing due to rising mortgage rates? Just normal spring season? A little of both? That’s what we’re on the watch for.
Every 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. I’m Mike Simonsen, I’m the CEO of Altos Research. Let’s see the details for the week of April 18, 2022.
Single Family Homes Inventory Climbing
Available inventory of unsold single family homes rose 3.6% this week to 271,000. That’s a nice jump from last week though actually quite common for this time of year. So even though inventory is rising faster than last year at this time, we still have fewer available properties and more competition among buyers. Our inventory forecast anticipates we’ll cross over to have more inventory than last year in early July.
If the inventory build up accelerates and we get our year over year gains before then, that’d be one way we measure the market slowing. As of right now, inventory gains are following a very typical April pattern. Assuming they keep following that pattern, and we’ve finally broken out of the unusualness created by the pandemic, then July 1 we’ll start having year over year growth in inventory and will continue that growth through the mid summer.
For greater detail on our inventory forecast for the year, check out the hourlong webinar we hosted last week. It’s available on the Altos Research YouTube channel.
Record High Home Prices
Home prices ratcheted up to a new record high again this week. The median price of single family homes in the US is now $420,000. That’s a little over 1% gain from last week and staying 10-12% higher than last year. Two years ago this week, we had passed the three weeks of price correction at the start of the pandemic and prices had ticked up for the first time.
If you go look at our Altos Research videos from that time, you’ll hear how shocked I was. Everyone assumed that the housing market would tank with the recession. In fact in the summer of 2020 the forecasters who were using econometric models that use factors like unemployment and GDP growth to project home price changes, those guys were still forecasting home prices to drop well into the late summer. It was a fascinating lesson.
Even as we were literally measuring home prices actually climb with buyer demand every week, we could still hear forecasters predict that home prices must tank because massive numbers of people were losing their jobs. People lose their jobs, they can’t buy homes. It turned out to be in retrospect the people who lost their jobs were lower wage service workers, people who were already locked out of the housing market in the US.
So the pandemic recession hit and real estate demand actually increased. In fact demand increased before any stimulus hit the economy. Who knew? I certainly didn’t have that foresight to predict that was going to happen.
But the lesson here is this: we finally now can measure real estate market in real time. A lot of real estate data is really old by the time it reaches you, but we can measure it right now. And there are a lot of variables which we don’t know or can’t measure when predicting the future. So, while interest rates are rising and the chances of this booming economy falling into recession for next year are also rising, those factors alone don’t tell us about where home prices are headed. And what we know right now is we still have a massive imbalance of demand over available supply.
So when we look at the price curves over time, here’s how it looks. We have 6-8 weeks of rising home prices still before they hit their natural summer plateau. Prices are staying 10-12% above last year at this time. The real oddball year was 2020 where you can see the initial pandemic dip and then recovery and then demand stayed high through the fall and prices didn’t recede at all like they normally do. So expect $435 or $440,000 for the median house price this summer. And when the effects of higher mortgage rates kick in, we’ll see it in these numbers. Later in the year we could see the price gains compressing finally. We’ll report it when we see it.
Immediate Home Sales
Speaking of demand imbalance, we had 31,000 immediate sales this week. That’s a nice jump from last week. More homes are coming to market and they’re still closing immediately. The headlines are very sensitive to any signals that demand is slowing. This number sure doesn’t reflect it. The Twitter and YouTube comments with agents sharing anecdotes about their bidding wars corroborate the data. Active inventory is building, but the market is telling us buyers haven’t backed off yet: Almost 100,000 new single family homes hit the market this week, a third of them already in contract.
If there are any signs of demand slowing it’s maybe here. This is the price reductions curve that we’ve been watching carefully. Again, each line here is a year. You can see that our price reductions in the dark red line are definitely running above last year, but they’re very low still. And the curve with price reductions climbing in April is quite normal. Last year was the oddball. 18% of all the homes on the market have taken a price cut recently. That’s below what you’d normally expect to be around 30%. Again, we know that demand is way stronger than supply, therefore few sellers end up taking a price cut.
We also know that as the spring transitions into summer, price reductions will climb. As of right now these are normal patterns. Slightly more inventory, with less buyer demand competition. The market is normalizing but not yet normal, let alone any crash happening.