A true data geek, Mike founded Altos Research in 2006 to bring data and insight on the U.S. housing market to those who need it most. The company now serves the largest Wall Street investment firms, banks, and tens of thousands of real estate professionals around the country.
Oh man, the market is heating up faster than I was hoping for. The first of the leading indicators for the new year are in and the homebuyers are pushing up prices very quickly.
This is the week’s market report. The first one of 2022. Each 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.
Inventory is at a new record low, but that’s not really the story this week. There are only 292,000 single family homes active unsold on the market right now. It is a new record low, down just slightly from last week. We have several more weeks of inventory declining and the question remains whether inventory bottoms in January or February like normal or whether the market acts like last year and keeps shrinking until the end of April.
Because this is unprecedented territory, I don’t have any way to say with confidence what to expect. One the one hand, demand remains super high so that implies home buyers will gobble up anything that comes to market, on the other hand, maybe we’ve hit some sort of natural low where there’s no more slack to remove and inventory simply can’t shrink from here. I don’t know and we’ll just have to keep watching week to week so we can report it as it happens.
2022 Real Estate Market Leading Indicators:
The real story this week are the pricing leading indicators. The Price of New Listings had a very big jump this week. Remember that the price of new listings is a metric that’s known as a wisdom of the crowds. In an efficient market like housing, the sellers and listing agents each read the signals that are around them - they know how many bidders there are on the neighbor’s house, they know how crowded the open houses are, they know whether buyers are over bidding and paying cash. And each seller uses this knowledge to price their new listing.
If all these signals are strong, sellers price their new listing a little higher to capture the demand. And that’s what’s happening right now. Follow the light red line here. Each year in January the new listings price jumps with spring demand. The steepness of that jump and the speed with which it hits tells us about the spring buyer demand.
Some years January is more mellow. Takes a few weeks for prices to start climbing. Last year you can see a steep climb in January and February. What’s unusual this year is that this jump just the first week of January is already spiked big.
The price of the new listings this week is $353,900. That’s up from just $319k just last week. Massive spike. That says to me sellers are much more prepared for the early season demand than they were last year. Sellers are seeing the same patterns as last year and they’re ready to capture the demand in their increased prices.
You can see in some Januarys the price of new listings has barely budged at all yet. This can also be a function of when the holiday falls during the week and winter weather, for example. But this year the spike is big and that implies big home price gains when the sales close in February March and April.
The median price of the whole active real estate market is $369,900 that’s up more than 1% for the week. Home price gains are on track for another really big year, folks.
Here’s another leading indicator. Price increases. This is the percentage of the active real estate market that has had their price increased in the last few months. If a house is on the market in the fall - it’s either purchased or maybe withdrawn and now it’s back on the market at a higher price.
Locally you can use this metric to understand investor fix and flips. But it’s also an indicator of demand. Price increases usually spike in January when we shift into the new buying season. We can use Price increases to gauge demand and therefore future transaction prices because the greater the demand the more investors lean into it.
You can see back in January of 2019 after a year of rising interest rates, price increases was only at a couple percent. You can see how rising rates muted demand. It didn’t crater the market, but definitely softened it. Last year was nuts with already 6.3% of the market with price increases.
Last fall I thought we were going to be a little more mellow this spring. But with a big jump to 5.6% of the market with price increases this week, it sure looks like we’re on track to another spring of intense bidding wars that drive prices higher.
By the way, our January webinar is this week Thursday January 13th at 10am Pacific. In the webinar we’ll look at all the leading indicators, we’ll spend time with the various inflation and interest rate scenarios and we’ll examine what the whole coming year looks like. Don’t miss that. This Thursday January 13 at 10am Pacific
Last for this week is our Immediate Sales tracker. No signs of slowing down here either. Remember that immediate sales are those that get listed and take offers to go into contract within hours or just days of listing. We’re at the annual low point for transaction volume, but still 25% of all the new listings are going essentially immediately. In this chart each bar is the total new listings, the light colored portion are those that went into contract immediately. If you watch these videos every week, you’ll know that we’re always on the lookout for signals that the market might slow or turn.
One of the places we’d expect to see at market slowdown is in the immediate sales. When demand weakens, the first thing that’ll happen is that people won’t jump into those bidding wars so instantly. Like our other leading indicators, Immediate Sales is showing no signs of slowing. In fact, I currently expect this to climb sharply in the coming weeks.
OK - that’s the data for today. As I mentioned, it’s Altos webinar week so we’ll have the full hour to dive into more of the leading indicators and look at more of the other economic variables that impact the real estate market. That webinar is Thursday January 10 at 10am Pacific.
To get your own local Altos reports, you just go to AltosResearch.com and book time with our team.