Inventory Is Now Declining in Key Markets

Unsold inventory in the two biggest housing markets in the country, Texas and Florida, declined this week - there are fewer homes for sale now than a week ago. Inventory seems to have peaked for the season and is slowly inching down.

There appears to be two reasons why we’re seeing a seasonal peak in unsold inventory now, when last year inventory in these states didn’t peak until the end of November. 

First, interest rates are falling, whereas last year they were rising. As I’ve mentioned before, rising rates create rising inventory. We may finally be on the other side of that slope, making for better dynamics for potential buyers.

Withdrawals are on the rise too. We’re seeing 30-35,000 withdrawals each week now, where last year it was more like 25,000. This probably reflects seller discouragement in a low-demand market, pulling their listings to maybe wait until next year. And it also reflects that most homeowners in the country have cheap financing, so they can afford not to sell in unfavorable environments. 

These two trends together are keeping a cap on inventory for the rest of the year, especially compared to last year.

Last year at this time inventory climbed at 1.3% for the week because rates were rising. This year rates are inching down and as we’ve discussed, this should lead to compressed inventory growth. So nationally the number of unsold homes on the market rose at less than 1% for the second week in a row. Inventory growth is slower than last year. This has implications for pricing, and for buyer competition and for transaction volume in the 4th quarter and in 2025.

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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 August 26, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

There are 704,000 single family homes unsold on the market now. That’s a slight increase from last week. Inventory growth is slowing as mortgage rates fall. 

It would be normal for inventory to top out in August, so this flattening isn’t a big deal. It’s just important to point out that we’re on the other side of the mortgage rate summit. Last year at this time rates were climbing, this year they’re  finally falling. Last year inventory was rising much more quickly, this year that rise is slowing. 

Even though inventory has probably peaked in Florida and Texas, the number of unsold homes across the whole country hasn’t topped out yet. What we’re seeing is maybe a rebalancing of the trends. In the first half of the year, we had a really bifurcated market. With the sun belt growing inventory quickly and the central and northeast remaining very restricted inventory. Places like Ohio and New York still have inventory growing. So the trends seem to be evening back out.

Because of this, inventory nationally might not top out until October. We’re currently expecting about 715,000 homes on the market unsold by late October. 

In total we measured a 6,000 unit gain this week. That's less than 1% again. In this chart the relative tightening compared to the last two years will happen after mid-September. Because in 2022 and 2023 interest rates spiked in September.

New Listings

Looking at the new seller volume this week we see only 65,000 new listings unsold plus another 12,000 immediate sales. That’s still roughly 9% more sellers than last year. It’s a lot fewer sellers than is normal for August. It’s about 4% fewer sellers than a week ago. This seller volume is on the way down for the rest of the year. Fewer and fewer sellers each week on an already low number. 

In this chart you can see how we’re now three Augusts into the restricted seller environment. Last year was the tightest. I expect that next year we’ll have slightly more, gradually transition ourselves out of this supply constrained market. There are now 7 states where inventory is above 2019 levels - back to normal. By next year at this time I expect a bunch more to be back to normal.

It’s important to point out that we measured the fewest immediate sales for August since we’ve been tracking. Immediate sales are those that get listed, take offers and go into contract essentially immediately after listing. Just a few days. This year the tight inventory market like the northeast, or the cash heavy markets like Orange County California both had plenty of immediate sales - for the best properties. Few immediate sales tells us there’s no urgency for buyers. We haven’t seen a notable uptick in immediate sales with slightly lower mortgage rates, but we’re watching for any late season response in demand.

Pending Home Sales

On the purchase side, there were 65,000 new single family contracts pending. That’s just a tick down from last week and is a few percent higher than last year at this time. It’s encouraging that there are a few more sales each week than last year at this time, but there’s no real sign of growth yet. Later in September and October, it’ll be interesting to watch the new pendings each week. That was that spike in mortgage rates in 2022 and 2023, which discouraged a lot of buyers. You can see in this chart the purchase slowdown especially in October 2022 in the light red line here. Do we finally show relative sales gains in the fourth quarter? We’ll keep watching.

There are 368,000 total single family homes with sales pending now. That’s 2% above last year but basically unchanged. We’re still on the 4MM annual pace for home sales. It’ll be tricky to measure any relative improvement in home sales in the fourth quarter. We don’t seasonally adjust the Altos numbers, we’re simply counting everything. I’m of the view that the seasonal adjustments have been less precise in the post-pandemic world. 

The takeaway for the home sales rate is that it’s maybe just a tad above last year at this time and the easier annual comparison starts later in September. 

Home Prices

The median price of single family homes in the US is inching down now and for the rest of the year. The median price of all the homes on the market is $449,000 now, which is just a fraction of a percent lower than last week. It’s unchanged from last year at this time. We’re past the seasonal peak in pricing. What we’re looking for is whether sellers do more aggressive discounting this fall than last year. Or do they simply not discount and just withdraw the listing to try again later?

The price of the newly listed homes this week is $399,998, just a hair under $400k. The new listings price is also just barely ahead of last year. That gain has been compressing. Recently the new listings prices were 2-3-4% above last year. Now it’s 0-2% above last year. New listings prices should hover in the $390s for the month before declining later in the fall. 

The price of the homes going into contract this week - that’s what I’m showing here - is $385,000. That’s a notch of 2.5% down from last week and is hovering about 4% higher than a year ago. 

So, the listings prices have compressed to essentially no price gains over 2023, and the sales prices are still just a bit above last year. You can see that here the dark line for 2024 is running just above the last two years. 2022 was when we had home prices drop - you can see that change in June and again in September here. Last year was more seasonal and is why we ended 2023 with home price gains over 2022. I expect us to follow the more normal seasonal curve here and end the year with 0-3% home price gains over last year. 

Price Reductions

Just about 39.9% of the homes on the market have taken a price cut from the original list price. In the next month or two as inventory starts to decline for the year, the percent of the homes on the market with price cuts will decline also. There’s a natural seasonal curve here. Withdrawals increase in the fourth quarter - anyone who hasn’t gotten an offer pulls the listing over the holidays. We’re close to the seasonal peak in price reductions. Unless we get a mortgage rate spike like we did in the last two Septembers.

In this chart you can see how we’re just about even with the price cuts level of 2022. In September of that year, mortgage rates jumped. As a result, buyers backed off quickly, so unsold inventory jumped, and sellers cut their asking prices. In the light red line you can see that jump in September 2022.

The opposite trend is probably happening now. Mortgage rates are falling. So if you’re a buyer in this market, you’re not getting more scared each week. Demand will decline with the season but not exacerbate the season like each of the last two years. If you’re a seller in this market, hopefully you’re pricing to move the property and not overpricing to begin with. Much of the year we’ve had a bifurcated country with some markets getting their overbidding and immediate sales but other parts being very slow. I mentioned Texas earlier. Texas may have crested inventory for the year. The Austin Texas market peaked inventory a few weeks ago. Austin leads the country in price reductions now, taking the top spot from Sarasota Florida. I will be watching these markets to see if price cuts have peaked also.

The big trends from earlier in the year are shifting now. And that’s why we do this data work each week. If sellers finally change their expectations, we’ll see it in the data quickly. Maybe  Mortgage rates have finally turned the corner? For buyers and sellers, these conditions can change fast and it can be very impactful for smart decision making. They need to hear the data from you so they know how to act. You should join us at Altos.

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