Mike Simonsen is the founder and president of real estate analytics firm Altos Research, which has provided national and local real estate data to financial institutions, real estate professionals, and investors across the country for more than 15 years. An expert trendspotter, Mike uses Altos data to identify market shifts months before they hit the headlines.
For several weeks I’ve been reporting data that shows the housing market growing in 2024. Those metrics - specifically the pace of new listings and new sales contracts - slowed this week. Our immediate sales metric of homes that get offers within a couple days of listing also slowed. New listings and new contracts both still show a bit of improvement over 2023, but the growth rates have slid back down.
Two things happened last week that may have contributed: mortgage rates have risen again, back up to 6.9%, and the country was also in a deep freeze. That could delay a few listings and a few offers. Or maybe both of those things together caused the market to tap the breaks. Either could reverse any moment... or could turn for the worse. That's why it's important to keep an eye the data every week.
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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 January 22, 2024. Please refer to the video below for all the charts I mention in this transcript!
Available inventory of unsold single family homes has been increasing compared to a year ago. But because the new listings pace slowed this week, inventory growth slowed,
There are 506,000 single family homes unsold on the market now. That’s up just a few hundred homes from last week. And is more that 7% greater than last year at this time. In this chart each line is a year. 2024 is started at the left end of the chart. Tracking above last year, with the gap growing each week. That’s why I’ve been optimistic for greater selection this year for buyers. Rising mortgage rates leads to rising inventory levels. And while rates are down from the peak in November, they have been rising pretty steadily for a month again. And they’re certainly higher than a year ago. I suspect there are a lot of home buyers who are happy to pause making offers when rates tick up. They prefer to jump when rates move down.
In most recent years, available inventory ticks down during the last week of January. This is part of the spring market cycle. And you can see it in each line of the chart here. Last year, and each year of the pandemic, inventory fell that last week of January. But even in the pre-pandemic years, 2017-18-19 are at the top of the chart when we used to have 800,000 homes on the market at this time of year. So our inventory forecast model still expects inventory to fall in next week’s data. Will be interesting to see if that happens as normal.
You can see the momentum in new listings growth is what slowed this week. 54,000 new single family listings, of which almost 10,000 were immediate sales. The immediate sales are the ones that were listed and went into contract within a couple days. Total new listings is just 2% more than the same week a year ago. I find this a little disappointing because I’m of the view that more sellers and more inventory will help everyone in this market. More liquidity, more selection for buyers, more transactions, and less upward price pressure.
In this chart each line is a year. The light red line shows last year and how few sellers we had all year long in 2023. Since the middle of November, finally we’ve seen sellers inch back into the market. Recently we’ve seen as many as 10% more new listings each week than a year ago. That’s not a lot, but it is showing signs of growth. I’ve been hoping that trend would continue, but this week it fell down to just 2% more than a year ago. 10% growth slowed to 2%. Maybe that’s the deep freeze that gripped much of the country.
The gray lines in this chart are previous years. When we look in this context we see that there’s no sign we’ll have a lot of inventory this year for buyers. But I continue to expect inventory growth all spring. This will be especially notable if mortgage rates stay in the upper 6s or 7s. As of today, rates are 6.9%, higher than they were a month ago. Higher rates means more inventory.
The pace of sales is above last year, but barely. Like inventory, the sales rate has been growing, off the very low levels we saw in 2023. But this week that growth stalled. There are 262,000 single family homes in contract. That’s up 4.6% from last week and 5.4% more than a year ago. There are 5% more homes in contract now than at the end of January in 2023.
There were 50,000 new contracts started this week. And this is where you see the slowdown for the week. 50,000 new pendings is only 1.4% more than last year. That’s the weakest annual growth in over a month. Like I said, I suspect this is weather related, but it’s definitely what I’m watching next week and very closely all spring.
In this chart each bar is a week with the total count of homes in contract across the US. The taller the bar, the more home sales have contracts pending. The light portion of the bar are the new contracts each week. This week’s reading is at the far right end of the chart. See it climbing in January. We’ve highlighted how there are 262,000 homes in contract compared to just 249,000 last year at this time.
The sales volume will keep climbing for the next few months as happens with the spring season. I’m still holding the view that sales will continue to grow above last year. And you can be sure we’ll revisit this each week in case the data starts turning and proving me wrong.
Even if a few listings and offers get delayed because of the cold, or because mortgage rates jumped up, home prices are on a less volatile curve. The median price of single family homes in the US is $420,000 again this week. That’s a few percent higher than last year, unchanged from last week. Home prices are on track to post a new all time high in May.
The price of the new listings this week is $399,000. That's up a couple percent from last week and 5% higher than last year at this time.
It’s fascinating to watch some folks insist that home prices are falling or that they will crash in 2024. I’m always on the lookout for signals of home price corrections. And there are always variables that could bring home prices lower in 2024. For example mortgage rates could jump over 8% again. Consumers are very sensitive so if rates jump, then you’ll see abrupt purchase declines and we’ll see home prices adjust very quickly to the lower level of demand.
While this could happen - I don’t predict mortgage rates so they could jump from here again - it’s important to recognize that at this moment there is nothing in the data that indicates home prices will fall this year. Buyers are there for the current supply at the current prices. Keep in mind also that homes that get listed in January, take offers in February, those deals close in March and April. So we already have visibility of home prices for a lot of the year.
In fact the more credible risk in 2024 is really upside risk. The risk that demand jumps and home prices push higher. If rates fall into the 5s as many predict, that will be a big demand stimulus so inventory will fall and competition will push prices higher.
Price reductions are another way to watch this. There’s only 31.4% of the homes on the market that have felt the need to cut their asking price. That’s in the normal range and is improving each week. Each week we have fresh spring inventory, and we have enough buyers that the crop of sellers doesn’t feel compelled to cut asking prices.
Now, mortgage rates have been climbing for a month. At some point buyers will slow, and the sellers will notice. What is that threshold? If rates jump back over 7%, I think you’ll see sellers react. We’ll still have fresh inventory, but you can see mortgage rate jumps in this chart very quickly. In 2022 rates were climbing from the 3s and you can see the price cuts kick in starting in March. That’s the light red line here. By April the slowdown in buyer demand with spiking mortgage rates was really notable.
You can see the spike in September price reductions each of the last two years.
If home buyers are lucky, mortgage rates will resume their slide. You can see how quickly falling mortgage rates spur demand when you look at the price cuts data too. 2020 is the black line on this chart and see how quickly buyers jumped in when rates fell that year. On the other hand, staying in the mid-to-low sixes seems like we have plenty of demand this spring, but not overheating. If you’re interested in a sustainably improving housing market, then rates staying stable in the 6s might be the best scenario.
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