Based on the trends we can see after the start of the year, I’ll project 2024 will see probably 15% home sales growth over 2023. Home prices will be up this year by a few percent also.
These are very clear trends as we start the new year. The market can change of course. 2022 started insanely strong and weakened rapidly in the second quarter. 2023 started with recovery, but slowed down in Q3 as mortgage rates hit 8%.
But 2024 is starting stronger than last year. And demand is increasing each 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 8, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are 499,000 single family homes unsold on the market now. That’s 2.75% fewer than last week, but 6% more than last year. Each week inventory is increasing just a bit relative to last year. There are slightly more sellers each week.
Last year was marked by how few sellers there were. It sure feels to me like that crazy restriction is easing a bit. So we can expect to have more sellers all year. Unless rates dip into the 5s, then I expect demand will pick up so quickly that inventory will drop again. I’ve pointed out that consumers are more sensitive to changes in mortgage rates than to the absolute levels. Over the last 24 months we’ve had incredible volatility in mortgage rates. And if rates stabilize in the 6s and 7s this year, that will allow these trends we see now to continue.
This chart has the last decade of available inventory cycles. I’ve highlighted the vertical lines last year and in 2019. At the far right end of the chart you can see inventory is declining as normal for the season. Just a tad more homes on the market now than last year. But of course there is no signal for inventory getting back to normal this year. Just slightly more, which is a good thing. More supply means more sales.
Inventory growth is not spread across the country. Inventory is climbing in the south and central US. Texas, Florida, Arkansas, Louisiana up through Nebraska and Wisconsin have more homes available to buy than last year at this time. Unfortunately the Western and Northeast states have less available inventory than last year. Nevada, California, Arizona, New York & New Jersey. It’s going to be fascinating to see how this regional disparity plays out for the rest of the year.
On average, inventory is building relative to last year. In fact each week now the new listings data is coming in slightly ahead of last year. In the fall inventory was rising because demand slowed when rates jumped over 8%. Now buyers are there; we just have a few more new sellers each week. For 2023 we had very few sellers and it looks like that’s loosening up a bit finally.
In this chart each line is a year. The light red line was the curve for 2023 and you can see dramatically fewer sellers than normal. The gray lines are previous years. The dark red line is just starting at the left end of the chart and it’s 9% more new sellers than the same week last year. That’s encouraging to me.
There are some folks who have a hypothesis that we might see a flood of sellers this year if rates come down. These are folks who held off selling last year and now will rush to get the market. That could happen. If it happens, you’ll see this dark red line starting to climb above the gray lines. You see right now we have a few more sellers, but not a lot yet. So keep your eyes here to see if the hypothesis that we’ll have a flood of sellers starts to emerge.
I think it’s important to keep in mind that as inventory of homes to buy grows, so does the pace of sales. This really illustrates how we had a supply constrained year last year. Sales were held back for lack of sellers. There are now 247,000 single family homes in contract. That is 4.25% more homes in contract now than last year at this time. These are sales that are going to close in the next month or so. So the sales rate is already growing for 2024.
In this chart each bar is the total homes in contract. The taller the bar, the more sales in process. The light portion of the bar are the new contracts. I’ve drawn a horizontal line to show you the level compared to last year. These two first weeks of January are the fewest sales of the year of course but you can see how the sales rate is growing.
New contracts were 13% more than last year during the first week of January. This sales rate has been trending up very obviously. So I am pretty confident that we’ll see 15% more home sales in 2024 than we had last year. That’s a pretty healthy growth, but it’s easy from such low levels. Total sales pending is 4% more than last year the new pendings this week is 13% more. Home sales are growing.
Meanwhile price reductions are dropping rapidly. Each week fewer home sellers need to drop their prices. Currently 32.8% of the homes on the market have taken a price cut. That’s 200 basis points fewer than last week. There are fewer price reductions because there is more fresh inventory and more of them are getting offers.
In this chart each line is a year. As each year starts fresh, new inventory gets listed and they don’t take price cuts until later in the season. So you get this natural seasonal curve. 2024 is showing us rapid improvement in price reductions, dropping faster than normal for this time of year. Meaning fewer sellers feel the need to cut their prices. That says to me that sellers are recognizing the home buyer demand is there.
Normally nationally about a third of homes take a price cut before they sell. That’s the gray band in this chart. Today’s market is right in the middle of this normal zone. Obviously in recent years, the market was way hotter than normal with fewer price cuts. Last year started slow and then recovered so price reductions didn’t get back to normal until the middle of February. Price reductions are a leading indicator of future sales prices. A house that is on the market now has demand, so there are fewer price cuts, these get offers in January and close in February or March. So you can see in the dark red line on the left side of this chart that home price signals for 2024 are already starting stronger than last year.
After the first of the year we always see early price signals with the price of the cohort of new listings each week. Sellers have waited over the holidays and they start hitting the market right after new years. If they have buyers, the price of the new listings spikes up quickly. You can see it most dramatically two years ago, at the peak of the pandemic buying frenzy. The bright red line price of the new listings spiked up quickly after January 1. This year we can see a little spike in the new listings price already to $409,000. Though I expect it to dip again next week before resuming a climb through May. What we’re looking for here is how quickly the price of the new listings rises in the next few weeks. It should tell us if we’re looking at a 0-3% home price increase for 2024 or maybe 3-5% increase.
The median price of all the single family homes in the US is now $418,000. There is enough strength in the pricing signals that it looks like this spring we’ll pass the all time high from June two years ago. Like inventory the home price appreciation is 3-5% average across the country but it is not the same everywhere. Some markets are still down from the pandemic peaks and haven’t found the bottom yet.
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