I’ve been talking about how this is a supply constrained market... and finally now at the end of April as we see a little more inventory, the good news is that we’re seeing more purchases too. This seems to confirm my conclusion: more supply of homes for sale means more home sales.
This is notable because if you use mortgage purchase applications as a proxy for housing demand, you’re underestimating demand. Purchase apps are low relative to previous years. Fewer home sales are happening now. But the underlying demand is better. We have too few sellers. The quantity demanded is greater than the quantity supplied.
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I’m Mike Simonsen, I’m the founder of Altos Research. Here’s the latest data as we close out April 2023.
Last year the headline of this video was “Inventory is skyrocketing.” During the last week of April in 2022, inventory rose 6% in one week. This was coming off the crazy pandemic lows of course, but it was really telling about how abruptly purchase demand stopped.
This week in 2023 now inventory rose 2%. It’s a healthy clip and very much welcome. Last year inventory rose because demand was slamming on the brakes. This year we’re just starting to see a few more sellers. It’s a much different dynamic now. There are now 422,000 single family homes on the market across the US. Last year at this time there were only 292,000 homes on the market. We have 44% more homes on the market now than we did a year ago. But remember that just two months ago we had 75% more. The inventory difference from last year is shrinking dramatically even as we finally get a little supply building for the spring now. It’s starting to look like we’ll finish 2023 with just about the same or slightly less inventory than we started the year. So the inventory gains will be totally gone. Probably finish the year at 500,000 single family homes on the market.
This week we had the most new sellers of the year. 85,000 single family homes listed, but that compares to 99,000 last year. 15% fewer sellers now. Of those 85,000 new listings, 20,000 are already in contract.
Last year by April, inventory was already piling up very quickly. And it was not due to a flood of sellers. This year we’re just now starting to get more sellers. Each week the bars are getting taller as you’d hope in April and May, but we have 15-20% fewer sellers each week than last year.
If you’re looking for future inventory, data last week from Black Knight pointed out that we have record few homeowners who are delinquent on their mortgages. Record few. American homeowners are in really strong financial shape. It’ll take dramatic economic change before we get resale home supply from distressed sellers. Dramatic economic change may be coming but it’s not here yet. Maybe 2024 will see that inventory growth if a recession hits deeps. We’ve been looking for this inventory all year, but it’s now looking like 2024 at the earliest before it arrives. If ever.
We can see the pace of sales ratcheting right now up too. I’ve been noting how we’re in a supply-constrained market. And that the very low rates of sales is at least partially because there just aren’t that many homes to buy. So what we’re looking for each week is: do both of these grow at the same pace? Do sales climb with supply?
The light red bar here in this chart is available inventory which we’ve been talking about inching up finally. (Note: watch the video at the top of this post to see the charts, or click here to watch on YouTube). The dark red bar are the number of pending sales at any given time. Which is also stepping up each week. Last year at this time, inventory was climbing quickly and the pending sales much more slowly. You can see the dark red bars in the middle of the car were on a much flatter curve in April May and June. While the light red bars of inventory had big climbs each week. One characteristic of the pandemic craziness was that there were more homes in contract at any time than there were available on the market. Usually, pre pandemic, there’d be three times as many active vs. pending. So that was flipped until July last year.
At the right end of the chart you can see the dark pendings bar stepping up each week now along with the inventory bar, which has finally started climbing for the spring. So like I’ve been looking for, sales are increasing along with supply.
We can see happy buyers in the price reductions data too. Price reductions are now fewer than 2019 and still declining each week. This really illustrates how much different the market is now than it was last year at this time. See the light red line from last year. Last year inventory was jumping and price cuts were jumping. As of this week, 29.2% of the homes on the market have had a price cut. We have more fresh inventory this week and some fast sales so fewer and fewer homes need a price cut. This curve will likely hit a bottom in the next few weeks in May and start to turn higher as any homes being listed now that don’t get offers start to cut price to generate demand. Some of them are overpriced and will need to cut.
Will we get under 2018 before that happens? In 2018 demand was slowing due to rising mortgage rates at the time. The green line here you can see price cuts accelerating in April, May, June and July that year. Now is the opposite trend. I’ve been talking about the slope of this year’s trend and how it really illustrates how much improved this market is. So keep an eye on price reductions to know when a slowing economy and new job losses start to impact demand. This is a clear signal right here.
The median price of single family homes in the US is $445,000 this week. That’s basically unchanged from last week and still up a little bit from last year at this time. All indications are the home prices will be flat to slightly down for the year 2023. Even as we can see demand out there, it’s not pushing prices higher. But that demand is definitely strong enough to keep a floor on prices.
If you pay attention to home price forecasters, you’ll know that the most bearish were saying that home prices would fall maybe 20% from the peaks. That could still happen with a deep recession, but it’s looking almost impossible for it to happen this year. Maybe next year? 2025? We’ll see how hard the economy tanks and which sectors are the most impacted.
The median price of the newly listed properties this week stepped down to $406,000. The new listings prices are moving sideways over the last few months. And again that’s a leading indicator that future sales prices and they are not rising. But they’re not falling either. With a very few exception markets around the US, buyers are buying at these price levels and these mortgage rates. The median price of the new listings is 4.5% lower than last year at this time. Last year it was 6% higher than the year before. That’s a big change from growth to declines.
In the chart you can see the dark red line is the median home price across the US, it rises until July 1 each year. This year is rising much more slowly than last year. Shows us flat but not significantly lower home prices for the year.
The light red line are the new listings and you can really see the difference in home buyer demand now from last year at this time. Last year the price of the new listings peaked end of May, so our year over year comparisons will continue to get worse all month this month.
The median price of the pendings is now just under $380,000. These are all the homes in contract, so this number is the earliest proxy for the sales that will complete in May and June, and for headlines that you’ll hear in June, July and August.
The price of the pendings is 1.3% lower than last year. And this trend is exactly what we’ve been sharing for a few months. Home sales prices are lower than last year at this time. The homes that were pending then were offers that happened in Q1 when the frenzy was just wrapping up and we could see mortgage rates climbing very quickly. Pendings prices peaked in May last year when that frenzy finally subsided.
What this tells us is that the sales that happen in May, June and July this year can’t be dramatically lower priced, prices aren’t falling. Because those sales are already in contract. Like I said, it’s growing very difficult for the country to have significantly falling home prices in 2023. Most of 2023 is already in the bag. Keep a watch here for signals if the end of the year grows weak like last year. Again, if recession hits, we’ll pick up the impact quickly.
This is of course national data, and local markets are behaving very differently from each other right now. If you need to get your local data to your buyers and sellers right now, you should join us at Altos Research. Go to AltosResearch.com and book time with our team to learn how to interpret the market signals for the people who need it most right now. They need you to be the expert for them.
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