I’ve been highly tuned in looking for signals that the housing market is slowing. By now everyone knows that unsold inventory of homes on the market is climbing. But is that unsold inventory surging? Is it getting to unsustainable levels? Are home prices dropping? As the economy stays surprisingly strong, mortgage rates have stayed higher for longer than anyone expected. That keeps home buyers on the sidelines. And because home prices are high, and affordability is low, it is always legitimate to fear a potential real estate market crash. Lots of people make that assumption. And from my perspective, I want to always know if it’s actually happening. So we’re always on the lookout for those signs in the data.
Inventory is up 1.5% this week. We’ll explore if that pace of sellers is accelerating or if it’s plateaued. Home prices are holding steady, we’ll examine the data for signals that prices might turn down. You might be surprised at what we find.
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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 June 17, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are now 621,000 single family homes unsold on the market around the US. That’s an increase of 1.5% for the week and is 38% greater than last year at this time.
But in the last few weeks, Inventory is no longer growing compared to last year. I’ve mentioned before that we could see 40% inventory growth over 2023 this summer. We’re almost there. But that relative level has compressed for two weeks in a row now. For 31 weeks inventory has been expanding compared to the year prior. Now it looks like that trend has plateaued. It was July last year when rates climbed over 7% and haven’t really come down yet.
Higher rates lead to more inventory. And we’re just about to cross the threshold where rates are no longer higher than they were a year ago. If the 30 year fixed mortgage rate ticks down into the 6s over the next few weeks. We could continue to see inventory growth compress. You can see the trend here in this chart. Current unsold inventory of single family homes is 621,000. That’s the dark red line. See how that line has been expanding the gap from last year. In the last two weeks, that expansion has stopped.
The inventory difference from last year peaked two weeks ago at 39% more homes on the market than in 2023. Now there are 37.6% greater than last year.
This is a subtle change but it means that inventory growth isn’t accelerating. Supply is not running away from demand. Even as inventory is greater now than a year ago, it was climbing faster each of the last two years in June. So chalk up one count for signs of stabilization in the residential real estate market. Isn’t that surprising?!
On to new listings. There were 71,000 new single family home listings unsold this week, with another 16,000 immediate sales for a total of 87,000 sellers. 87,000 total new listings isn’t bad, but it’s not great. If you only have 87,000 sellers it’s impossible to grow total sales to a 5 million annual pace. There just aren’t enough homes for sale.
There are about 9% more sellers each week than last year, so that’s good at least. That growth is down from earlier in the year. This is another indicator that inventory growth is losing some momentum. So if you’re betting on a crash, like expecting a big flood of inventory coming, or even an acceleration of inventory, I don’t see it in the data yet.
There are notably fewer immediate sales than last year at this time. Demand is not picking up even as supply slows down. Immediate sales remember are those homes that get listed and take offers and go into contract within a few days of listing. These are the best properties, well priced, in the best locations. There are always some immediate sales in any market, and we can gauge levels of homebuyer demand with how many immediate sales happen. In the hot markets, we watched 30% of the new listings get snapped up immediately. Right now it’s only like 1 in 7 homes get sold immediately.
In this New Listings chart, the dark red line shows how we continue to have a few more sellers than last year. Last year is the bright red line. So more sellers each week than a year ago. Look at this point in 2022 though. At that time the last of the pandemic sellers were still trying to sneak out while mortgage rates were rapidly rising. There were 115,000 sellers in mid June 2022. There are only 87,000 now. It’s hard to get runaway inventory growth when so few homeowners are interested in selling.
There were 69,000 new contracts for home sales this week. That’s just a few percent more than last year at this time. 69,000 is 2% more than last week. So, not cratering, but not showing any real growth either.
There are 396,000 single family homes in contract. That’s a couple percent more than last year, it’s up a smidge from last week. Any sales volume growth we saw earlier in the year has gone. The market is still 15% smaller than it was two years ago.
In fact what’s notable in this chart of the weekly sales volume is that you can see the light red line from 2022 peaked at this moment that year and the sales volume really cratered after the end of June 2022. Each line here is a year with the weekly sales volume - these are the homes that were on the market and took offers and went into the contract pending stage. 2022 loaded all the sales into Q1 and Q2, but by Q3 everyone knew they had missed the window and sales slowed way down.
We’re over two years into the era of higher mortgage rates. If we’re lucky, the second half of 2024 will see Fed rate cuts and perhaps slightly declining mortgage rates. That would be the opposite pattern from each of the last two years. If we get that, expect to see relatively better sales volumes in late summer this year. In this chart we’d see the dark line start printing above the previous years. Declining rates are not guaranteed of course. Rates could go up from here. And home buyers are very sensitive to the cost of money, so if mortgage rates climb again, to say 7.5 or 8% like they did last year, you’ll see these sales numbers drop very abruptly.
When we look at the price of the homes selling each week we can also see the abrupt change that happened in late 2022. Prices dropped in June and prices dropped in October.
Right now the median price of homes going into contract is just a hair under $399,000. Home prices have been at this level for a couple months. Prices are now 3.7% above last year at this time. I’d expect this measure of home prices to stay right about $400k until later in July before receding in the fall.
The median price of all the homes on the market is $455,400. That’s basically unchanged from last week. If you walk into the housing market today in the US, you’ll see that home prices are unchanged from last year at this time and in fact 1% below where they were in mid-June 2022.
So the price point where people are buying is up just a fraction from last year, but the overall market is unchanged price wise. It’s hard to see any annual home price appreciation in the data. It’s also notable that while home prices look flat, not cratering. There’s no sign in the data of major price correction, just flat. No growth.
We’ll close today looking at the leading indicator of future home sales prices. The percent of homes on the market that have taken a price cut from the original list price is now 36.4%. That’s up 70 basis points from last week and is 500 basis points more than a year ago. 31.4% last year at this time. Like the other indicators I’ve been reviewing today, price reductions shows very slow demand. It shows flat at best for future home sales prices.
Remember that it was in July last year when rates climbed over 7%, so it was the second half of the year when demand slowed most, and price reductions accelerated. This year that rate pressure came in the first half of the year.
In fact in this chart of price reductions you can see the lift in September in each of the last two years. Each line here is a year. In September last year and in 2022, that’s when mortgage rates spiked to their highest levels of each year. Over 8% last year. When rates spike like that, buyers stop, inventory grows, sellers have to cut their prices. You can see that very clearly in the data here.
This year as mortgage rates have stayed stubbornly high, price reductions have been growing each week. We’re on our way to 40% of the market with price cuts now, that’s notably slow. And is why we continue to expect slowing home price appreciation for the second half of 2024.
Add it all together for the week. Unsold inventory is up, but growth appears to have plateaued. New listings aren’t great, so that implies future inventory growth is capped. As long as mortgage rates stay elevated, the signals are for home prices to end the year flat with little or no home price appreciation over 2023. There’s nothing in the data yet that looks like prices dragging notably lower across the country.
And that’s why we do this data work each week. Homebuyers are obviously sensitive to the cost of money. And mortgage rates stayed higher for longer than anyone anticipated this year. They haven’t come down yet. What if they do? If you aren’t watching the data each week, you’re probably behind the curve. You have buyers and sellers who have no idea how this market is changing right now. They need to hear the data from you. You should join us at Altos.
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See you next week!