How slow will the housing market get?

One thing that’s hard for me is to communicate how quickly the brakes hit this market but that we’re also still way below normal available inventory. Supply and demand still keeps us in a sellers market. It was just 2019 when we had nearly a million single family homes on the market in June. So as all our financial markets are in turmoil, the question is how long do we stay here, how high and how quickly can inventory grow. What does that mean for buyers and sellers right now?

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.

If you aren’t using Altos market reports with your clients, your buyers and sellers, now might be the time to step up. Go to AltosResearch.com and book a free consult with our team. Because everyone is worried about what’s happening right now.

I’m Mike Simonsen, I’m the CEO of Altos Research. Here’s what we’re looking at for the week of June 13 2022.

Inventory

Total inventory of unsold single family homes is up to 396,000 this week. That’s up another 5.6% from last week. Some of this increase is seasonal. Normal, it’s June. Most years, inventory doesn’t reach its peak until September. Though most of the weekly gains happen before July. So we have probably 12 more weeks of inventory climbing before we hit the apex of the year. Available inventory is still less than last summer’s September peak, though it looks like we’ll pass that mark in probably weeks. So we’ll have most of the summer with inventory climbing higher than last year. We already have 16% more homes on the market than we did last year at this time.

When we put this in the context of normal times, in 2020 when the pandemic boom was already kicking in, there were 700,000 homes available, and it was only 2019 when there were nearly 1 million single family homes on the market in mid Summer. We have stock markets cratering, crypto markets tanked big today, mortgage rates resuming their climb. On the one hand, it’s hard to imagine how housing escapes this slowdown that’s hitting everywhere. On the other hand, what are the catalysts for doubling or tripling the supply of homes on the market?

There are some potential risks, for example we can see the new construction in places like Texas, Florida and Arizona starting to hit the market in bigger waves, sharply increasing the available inventory in those states. Homes have been under construction and stuck with supply chain issues for many months and those are now resolving. So we can really see spikes in inventory in those states that have heavy new construction.

This week Wednesday June 15 at 10am Pacific, we’ll do our monthly webinar where we take an hour to look at all the leading indicators, and the local markets. We’ll look at the latest inventory forecast for the rest of the year. Where will inventory peak and where will it end the year? How much will build and how close to normal can we get? Will we get back to 1 million homes on the market? We’ll take a look at everything we know as of today. That webinar is this Wednesday June 15 at 10am pacific. Join us so you can communicate with your buyers and sellers about what’s happening in this crazy market.

Prices

Home prices in general are at their record still. The median price of single family homes in the US is $450,000. Remember that this is still 12% higher than one year ago. And we’re likely to stay at this plateau for several more weeks before prices recede for the fall.

When prices start receding, don’t be surprised, this is a cycle they do every year. The prime properties with maximal demand happen right here in the second quarter. And if you list your house in the fall, you have to do so at a little discount to make sure it moves. The people buying homes now are unlikely to see equity gains like we’ve had, and people know it, so that reality has put a hard stop to investor and speculator purchases now. Rents are still high so current investment properties are still in generally very strong cash positions. We’ll talk in the webinar on Wednesday about scenarios for the future of home price trends in the next 18 months or so.

Price Reductions

Price reductions are up from 24.1% to 25.5% of the market this week. We’ve been reporting on price reductions for several months here. It will get back up to normal range by July. By the fall we can assume we’ll have more price reductions than normal.

Normal is going to feel really slow to sellers. Last year there were significantly fewer price reductions because people were buying everything in sight. If you watched these videos last summer you might remember that the market seemed to be cooling and normalizing a bit, then in the winter it kicked back into gear again and accelerated again early this year. There are lots of local variables in price reductions and we’ll cover that in the webinar Wednesday too. Some markets hitting the brakes harder than others.

Price Increases

On the flip side of price reductions are the price increases. This is a measure of homes we saw on the market recently at a lower price and now they’re back on at a higher price. Price increases are often a view of speculators in the market. House flippers.

There were big spikes in speculation each of the last two years. Now price increases are fewer and fewer each week. At 3.1% of the market, that’s the fewest price increases we’ve seen since the early early pandemic as the boom was just kicking in.

Normally 2-4% of the market is this kind of activity. You can really see the speculator activity grinding to a halt now. That’s gotta be a good sign for the health of the housing market. Creating opportunity for first time buyers and other non-investors to find their places to live.

Immediate Sales

113,000 new listings hit the market this week and 26,000 of them still went into contract immediately. We’re approaching the seasonal peak of demand so even while the price reductions number shows that demand is slowing, it’s still June and that’s when people buy houses. As a percentage that’s down to 23% of the active listings.

That’s falling, though it’s falling more slowly that I expected, frankly. Who are these people still bidding immediately on a purchase? Maybe they’re buyers who’ve been out bid for a year and finally see their opportunity. Maybe they’re buyers who are afraid rates will spike further from here. Maybe it’s just a function that it’s June? At any rate, expect this percentage to keep dropping. Fewer bidding wars, longer market time. Greater inventory.

As I mentioned this week Wednesday is our full hour long webinar. We have over 1000 people sign up for these each month and space is limited to 1000 so if you need to communicate what’s happening to frightened or unprepared buyers and sellers, you should join us. Wednesday 10 am Pacific.

As always visit AltosResearch.com to sign up and get your data for your local markets to your customers today.