Sellers across the country are remaining confident. Mortgage rates are up, but do buyers care? Homes keep selling fast and the available inventory keeps falling.
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. Traditional real estate data is released monthly, so by the time it gets to you it’s kinda old news.
The news right now is that it’s a hot market already for the spring, and the economic risks, like rising rates or or a falling stock market, have not yet derailed eager American home buyers.
I’m Mike Simonsen, I’m the CEO of Altos Research. Let’s look at the data and see the details for the week of February 7 2022.
The available inventory of single family homes for sale fell again this week. There are only 256,000 single family homes available if you walk into the market today. There will be another 80,000 or so that get listed this week. Many of those won’t last one week on the market. As we’ve been reporting for the last several weeks, there really are no signs of any of the consumer demand slowing. Even as mortgage rates are climbing.
We quite obviously have record few homes available. And this number looks like it’ll keep falling until the end of April before finally turning around.
The biggest question on everyone’s mind right now is "How will rising mortgage rates will impact the market?" If you are one of those folks who still hold a bearish view of the American consumer, rising interest rates are a big flag for you. In 2018 mortgage rates rose to their highest point of the decade, and the housing market definitely slowed.
We can measure the slowness. Every year for the past decade we’ve been removing homes from resale as we’ve converted them to investment properties. So each year we’d have maybe 6-7% fewer homes in active inventory. But by February of 2019 after a year of rising rates, we had 6% more inventory than the preceding year. A swing of 12-13%.
The dynamics of the US mortgage market don’t really allow for any more change than that. Rising rates impact your decision to own a second home, to add to your investment portfolio. Can I make two payments rather than just one? As payments get more expensive I own fewer homes. But nothing in the rate change impacts any of the Americans who gained another $6 trillion in equity and have their payments locked in for 30 year. So the only impact can be at the margins. A few percent more homes for sale.
It’s also really hard to see how rising rates will impact first time home buyers much. Slightly greater rates shift my price target window, but they probably don’t scare me away entirely. If I’m a late 30s millennial, it’s time to buy. I’m going to be shopping.
If anything maybe rising rates helps first time home buyers, because they have a little less competition and a little more selection. So that’s what we’re looking at. Maybe a tiny fraction more inventory assuming rates rise this year.
OK lets move on to prices. If you’ve been following along each week, you know that my favorite leading indicator right now is the Price of the New Listings each week. Because the new listings get priced based on how sellers and listing agents see all the demand in their local markets.
So when buyers are hot, the new listings price spikes fast. This week the price of the new listings is at $375,000 that’s the same as the whole market. Which is remarkable. Usually the full market has more expensive homes that move slower so the price of new listings is continually below the whole market. The overall market rises a bit slower as those new listings each week become the full market.
Usually in February there’s still a gap. This year that gap is already closed. This is an extremely bullish indicator for the year. Sellers know already that the buyers are bidding up prices and they’re pricing to take advantage of that. So, like I said earlier, there are no signs of higher rates cooling demand anywhere yet. Which is not surprising. It takes a few months. The pre-approval rate lock happened a month ago for buyers now. It takes a few months before buyers will be impacted.
On to the Immediate sales. We had a little dip in total volume this week, which is mostly noise. We can expect new listings volume to climb through June. Of the 60,000 new listings, 31% of them went into contract essentially immediately. Percentage wise, that’s not falling. It’s insane. A third of new listings are already gone in a couple days. This is one area that I hope rising rates cools a little. It’s unhealthy levels of buyer competition.
Let’s close today with price reductions. Only 19.2% of all the homes on the market have taken price cuts recently. That’s down from 19.5% last week and fewer than last year at the same time. You can see how the all the puzzle pieces fit together. Buyers buying quickly, in the immediate sales, with very small selection, means those listings on the market don’t need to take price cuts.
Again, this is a really strong leading indicator for home sales prices this year. Homes that are on the market now, if they were over priced take a cut in March, get offers in April and close in May. The May sales data gets reported through the traditional channels in June, July, and August.
But we can see right now in the first week of February where the pricing support is. It’ll be interesting to see where price reductions bottom out this year and when it turns up. Maybe rising rates helps this get back to more normal levels in the second half of the year. Keep your eye on this.
OK - that’s the data for today.