The Supply of Homes on the Market is Finally Declining

Inventory is down for the second week in a row. In the middle of November you’d expect that, but since mortgage rates spiked in early September, inventory has been climbing. With mortgage rates over 7%, demand has stopped cold. So the fact that inventory is ticking down now again, is a bit of a relief.

Inventory is down not because people are buying homes but because some sellers are not getting offers and they’re going to pull their homes from the market. Either way, supply declines. So the supply demand equation is a little more balanced. Declining inventory now is also a signal that there are not any waves of new inventory, maybe from panicky sellers, we don’t see any of those at least this fall. 

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I’m Mike Simonsen, I’m the CEO of Altos Research. Here’s what the data looks like for the second week of November 2022. 

Real Estate Inventory

There are now 571,000 single family homes unsold on the market. That’s down less than one percent from last week. So just a little downtick. But it’s down. Inventory peaked two weeks ago at 577,000. There are very few new listings hitting the market, even fewer than normal for this time of year. There are some going into contract and some being withdrawn. As a result, available inventory of unsold homes ticks down. 

You can see at the far right end of this chart that summer inventory seemed to have topped, started down, then started climbing again, and finally hit its peak for the year right at the end of October. So two weeks of inventory decreases. With the holidays so rapidly approaching, we can assume that inventory won’t climb again until after New Years. 

And this is what inventory looks like through the end of the year. Likely to end the year around 520,000 single family homes on the market.  The dark red line is this year’s curve. You can see the inflection point on September 1 when rates spiked most recently and demand halted.  The dotted line is where inventory is likely to trend through the end of the year. 

With the better than expected inflation numbers last week, rates dipped back down. It’s too early to see impact in the inventory data, but if you want to see one perspective on what inventory might do next year, you can watch the replay of last week’s Altos Research webinar. That’s posted here on the Altos YouTube channel. 

Home Prices

The median home price in the US now is $422,900 that’s down a quarter percent from last week. Prices will tick back each week until the end of the year. Should end about $400,000. 

There are very few new listings each week right now, but those that came on the market this week were priced at a median price of $374,900 that’s unchanged from last week. Listing at just a smidge under $375k, that’s a psychological threshold so it’s unchanged from last week. But that’ll keep sliding down through the end of the year as well. The new listings are light colored line here. We have a couple holiday downspikes to come before we see if after new years anyone wants to buy houses in this country. 

Home Price Reductions

We can also see that the shock of that September rate spike has maybe started to wear off too, by looking at price reductions.  This is the percent of homes on the market that have taken a price cut recently. Right now nationally 43.2% of the homes on the market have taken a price cut. That’s basically flat from last week. Up just a tiny bit.  So price reductions have almost peaked. One reason that price reductions will curve down for the rest of the year is that if the house hasn’t sold, It’s growing much more likely to be pulled off the market. Starting in January we’ll see relists and price reductions rise again as we see some of these homes back on the market. But for now it looks like nationally price reductions have probably peaked for the year.  The rate of price reductions is always very local. It’s always higher in Phoenix than in San Diego for example. And right now it’s way higher in some of those local markets. 68% of the homes on the market in Phoenix have had a price reduction. The buyers just stopped cold. 

Buyers have stopped cold all over the country of course. But for the markets whose inventory was kept in check by all the inbound migration buyer, those migrations have stopped. So inventory builds in Phoenix and Austin, but it’s not building in New York or Cleveland.  

Pending Home Sales

In fact the rate of new sales which we can measure each week by tracking the new pendings, the homes that were on the market last week and are now in contract this week, the new pendings rate is almost as low as Christmas week. There are only 314,000 single family homes under contract right now. And only about 50,000 new pendings this week. In this chart each bar is the count of properties in contract - the pendings. The light red portion are those newly in contract in that week. You can see, fewest in contract since early pandemic and each week very few contracts starting. 

Demand is just shut off. Supply is contracting too. The market is holding its breath until after the holidays and we’ll see where the world is at that point. 

These local dynamics are why if you need to help buyers and sellers understand what’s happening in the market right now, I encourage you to go to AltosResearch.com and book time with our team for a free local consultation. People desperately need to understand what’s actually happening in the market and they need you to help them make the right decisions.

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Thanks, and see you next week.