Is the 2024 Housing Market Beyond Saving?

Any sales growth momentum in the real estate market we might have had early in the year is gone. New home sales contracts are coming in pretty consistently fewer than last year - 4.9% fewer in the most recent week. Our "Immediate Sales" measure of homes that get listed, take offers, and go into contract in a few days is also notably lower than last year. 

Are we past the opportunity for declining mortgage rates to help demand and pick up home sales growth?

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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 July 29, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

There are 677,000 single family houses unsold on the market right now. Plus another 180,000 condos. That’s up 1.3% over last week. So inventory continues to climb each week. It’s normal for inventory to climb in late July of course. We’re expecting probably October this year before inventory of unsold homes peaks for the year and starts declining for the holidays. The peak of inventory looks like it’ll be about 700,000 single family homes and finish the year about 620,000. That’ll be a 20% increase over the end of 2023.

Right now there are 40% more homes unsold on the market than last year at the end of July. As mortgage rates rose late in the year last year, so did inventory. This year I’m expecting to not have that late year surge so the growth over 2023 will subside a bit. Inventory is up in every state of course. Several states have more unsold inventory now than in 2019. You might call those back to normal. The gap has been steady at 40% gains for two full months. It’s not expanding and like I said the comparison with last year will get easier, so we’ll finish the year with 20% inventory gains. 

In this chart of unsold inventory, each line is a year. It helps give perspective where the country is now, compared to how many homes used to be on the market in the years before the pandemic. You can also see the late-year surge in unsold homes in the two red lines from the last two years. In 2022 and 2023 mortgage rates jumped in September and October and so did inventory. I’m keeping my fingers crossed that this year is the opposite trend and we’ll see rates fall in the third and fourth quarter. 

New Listings

There were 68,000 new listings of single family homes this week. That level continues the recent trends. There are fewer sellers than normal, and slightly more than last year. But the gap from last year is closing. Sellers seem to be backing off. I’d guess sellers are as tired waiting for mortgage rates to fall as buyers are. 

In Texas for example there were 8300 new listings for single family homes this week that is pretty much exactly where it’s been in late July for several years. Earlier in the year, Texas had around 10% more new listings every week than in recent years.  That’s not true any more. 2024 has shifted from a growing number of sellers to flat compared to last year. 

Florida and Arizona show a similar pattern. These states led the inventory growth with new supply and weak demand early in the year now no longer have that supply-side momentum. So unsold inventory is more but not really growing.

Nationally 68,000 new listings this week unsold. Plus another 14,000 new listings that went immediate into contract with offers. 14,000 immediate sales is very low compared to the last few years in July. Overall there were just 4% more sellers this week than the same week a year ago. In the first part of the year there were 10-20% more sellers each week. Now there’s 4%. That’s what I mean when I say the seller momentum has evaporated. 

Coming Soon

And for a bonus chart this week, here’s the Coming Soon trends (see the video for this!) “Coming Soon” is a marketing technique that is only used in some places by some agents on some homes. These are homes that will be listed in the future. They’re doing pre-marketing.  We can use this as a leading indicator for future listings. The trend on Coming Soon was super high in June 2022 when everyone was hurrying to get the house listed as mortgage rates were spiking. It dropped after July that year. This year we saw some seller momentum early in the year, but you can see how the dark line here is now back down to last year’s extremely low level. This is another indicator that there’s no late year surge of inventory in the works. 

Pending Home Sales

Even as we can see no big surge of inventory coming, sales are still down and haven’t recovered. It seems like there’s just no incentive to buy right now. Rates are down from their peak, but not down that much. If you’re buying you might be waiting for even further rate declines. Some buyers are waiting until after the election. 

There were 65,000 new contracts this week. That’s an uptick for the week but 4.9% fewer sales started than the same week at the end of July in 2023. Where in the first half of the year I reported on some slight sales increases over 2023, we’re now running behind last year. 

Since May you can see the weekly sales rate is down and has not shown any signs of recovery. I’ve highlighted that time in gray here. This year’s dark line is now running fewer new contracts each week than last year. 

I’ve been saying that I expect mortgage rates under 6.75 to 6.5% would start to shake some buyers free. We haven’t crossed that threshold, rates dipped down to maybe 6.8%, but I would have expected some slight improvement in purchases, and we don’t see any. Maybe there’s some inverse psychology happening where if rates are rising, you want to get in before they go up more. But if you see rates falling, you want to wait until they fall more. So maybe I’m totally wrong assuming that if rates dip this year that sales will pick up. Maybe the opposite is true. But that’s why we track all this data each week to continually test the hypothesis. Keep your eyes here to see what happens next. 

Home Prices

The median price of the homes on the market is $450,000 again this week. By this measure home prices are unchanged from last week and from last year. In fact home prices are unchanged across the country for two full years. In fact we discussed this two years ago as a possibility. These asking prices will start ticking down in August.  

The median price of the new listings is $419,000. That’s the cohort of homes newly on the market this week. It’s showing reasonable resilience in pricing. Home prices have “downside stickiness” which means that sellers are very slow to want to accept lower prices even when demand falls. So the new listings cohort is 4% more expensive than a year ago. 

The median price of the homes going into contract this week is $395,000. That’s still averaging about 3 or 3.5% more expensive than last year. We started the year with home prices up 5-6% over 2023. That increase is now 3.5%. I expect this number to compress under 3% before the end of the year. Home prices are up some, but there's basically very little change in the price of homes nationally. Almost flat. Some markets’ home prices are up and some are down a bit. But across the country about 3.5% home price gains right now. 

The headlines you’ll hear, like the Case Shiller Index which comes out the last Tuesday of July for data reflecting March, April and May will still be showing decent price appreciation from last year. I expect those headlines you hear will slowly decline the rest of the year. There is nothing in the pricing data that indicates broad home price declines this year. If mortgage rates jump again, I will be on the lookout for prices to adjust as demand takes another hit. 

Price Reductions

And finally we turn to the leading indicators for future sales prices, the price cuts. Perhaps the most notable trend in the price reductions data is that the weekly pace has slowed. 39% of the homes on the market have taken a price cut. That’s a fairly hefty number. Obviously demand is weak, so fewer sellers get the offer and more of them take price cuts. This week is 30 basis points more than a week ago. So that’s up a little, not accelerating. During this period in 2022, price cuts were accelerating by 150 basis points each week vs. 30 basis points now.

In 2022 and 2023 both years had late year spikes in mortgage rates that stopped buyers, pushed sellers to cut their prices and we watched this stat jump. You can see the late year jump in price cuts in both of the red lines here. Hopefully, if we’re lucky, we see the opposite trend this year. Maybe we’re past the peak of mortgage rates and affordability improves for buyers for the rest of the year. If there’s any demand pick up, one place we’ll see it is in the flattening and decline in this trend line here. The dark line is this year’s curve. I expect it’ll peak in August, and if we’re lucky, show a decline with new buyer activity. If we’re lucky. 

And that’s why we do this data work each week. Mortgage rates stayed higher for longer than anyone anticipated this year. Maybe we’ve finally turned the corner? If we’re lucky? For buyers and sellers, these conditions can change fast. They need to hear the data from you so they know how to respond. You should join us at Altos. 

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See you next week!