Real estate inventory still climbing into November

Another week late in October, inventory is rising as buyers are at a standstill. It’s been 8 weeks since mortgage rates spiked over 6% and three weeks since they crossed over 7%. Everything is frozen. Normally in the fall inventory would be declining each week. But especially in Texas, inventory is climbing. In fact in much of the country, inventory is not climbing. Nowhere is it falling like you’d expect this time of year, but it’s just that Texas looks particularly bad as a lot of new construction is finally finishing and adding to the active inventory. We’ll look at all the inventory and price trends today.

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I’m Mike Simonsen, I’m the CEO of Altos Research. Here’s what the data looks like for the week of October 31 2022. Happy Halloween everybody.

Real Estate Inventory

There are now 577,000 single family homes on the market around the US.  That’s up 5000 from last week, almost 1%. 1,000 of that gain is from Texas, which doesn’t yet show any signs of plateauing. Texas is a very expensive state for taxes which ironically is one of the things that keeps the market there more healthy. Because it’s more expensive to hold real estate, you get more turnover and there is more supply for buyers. So we have more sellers, we have more new construction that was long delayed during the pandemic that is now finally completing, and we have fewer inbound immigrants from places like California and that’s a recipe for Texas to be the hardest hit state in this housing correction. 

Nationally, we have 40% more inventory than last year at this time. And with each week up 1% we inch closer to 2019. We still have 38% fewer homes on the market now than we did at the end of October 2019, but that gap is closing by 1-1.5% per week.  Suddenly it seems like if this market stays frozen with rates over 7%, we could get close to 2019 inventory levels in the next year. 

Pending Sales

We can get an early proxy for sales rates by watching the pendings cycle. This week saw a 2% drop in pendings week over week, to only 340,000 while actives increased by 1%. In this chart the dark bar is the count of single family homes in some contract stage in a given week. You can see how rapidly fewer homes are in contract each week. That’s 27% fewer than last year at this time too. 

New Listings

With new listings, there aren’t a lot, sellers are holding back nearly as much as buyers are. But if you look at the dark line here, that’s this year’s curve of new listings volume each week. It shows us with fewer new listings each week than previous years, but not a lot fewer. 57,000 new listings this week. Most years are 10% more. So a little fewer new listings, as I’ve been saying for a while there is no huge tsunami of new listings coming, but it’s moderating a bit. Some of the new listings are new construction that has been long delayed during the pandemic. So in places like Houston, that’s where a lot of the new inventory is coming from. 

If the new listings count climbs above previous years, like it did this spring, that’ll be a bearish signal for me. If it falls to an even lower percentage of recent years, that will be sellers holding back and maybe keeping a lid on the total inventory growth. Something to keep an eye on especially after we pass the holidays. 

Home Prices

Home prices ticked down this week as they have been pretty consistently since early July. The median price of single family homes in the US is now $425,000. Expect this number to be closer to $400k at the end of the year.  It’s that January-February period where home prices usually resume a jump for the spring, that’s what’s going to be telling for 2023.

The median price of those newly listed homes is $379,000, that’s also down as is totally normal for October. Sellers are adjusting to the current lack of buyer demand, but they sure don’t seem to be showing much urgency yet. The median price of the new listings, that’s the light colored line here, will also keep ticking back each week until the end of the year. 

Home Price Reductions

Meanwhile price reductions have not abated. The homes on the market are sitting and they’re adjusting their prices to face the fact that home buyers need to see a bargain, when mortgage rates are over 7%. This week almost 43% of the homes on the market have had a price cut. That’s up from last week. And you can see how price reduction started surging when rates jumped over 6% in early September. The fact that this curve hasn’t topped off or started declining like most years, this is a bearish signal for home prices on transactions that will close in the future. Like inventory this is highly regional, but there are a lot of markets where more than 50% have had a price cut. That’s really slow. The dark red line is this year, you can see it’s still climbing when other years normally start curving down as the market cleans up all the loose ends before the holidays and the reset after January 1.  As it stands right now, this is a big flag for 2023. 

As always if you need to get your local data to your buyers and sellers right now, you should join us. Go to AltosResearch.com and book a consult with our team to learn how to interpret this crazy market for the people who need it most right now. Look forward to working with you.

That’s all the time for this week. More next week.