The Surprising Resilience of Home Prices in 2024

We track inventory and home sales very closely around here, but to be honest, the biggest surprise to me this year has been the resiliency of home prices. 

Given the unrelenting mortgage costs, generally weak home buyer demand, and the year’s rising supply of unsold homes, I’ve been expecting home prices to recede a bit in the second half of this year, and they simply have not. That’s probably an important lesson for looking into next year. All the dominant trends in the housing market this year seem like they would indicate home prices declining. But with just a few local market exceptions, home prices nationally will finish the year up again. Home prices will go into 2025 with some upward momentum.

In fact home prices ticked up this week. The median price of the homes that went into contract this week - these are the new purchase offers with contracts pending -  is now 6% greater than last year. 

As mortgage rates have spiked in the last few weeks, and as the price paid for homes creeps upward too, the mortgage payments required for the median priced home in the country are on the rise again. Affordability is not catching any break. We had a little head fake with cheaper mortgage rates for about a month and that was it. Payments for the median priced home in this country jumped by 1.5% this week. 

Don’t forget though, that even though home prices are higher than last year at this time, payments are 6% cheaper than last year at this time. Last year in the fourth quarter, and then again in May this year, home buying costs were the absolute worst. I don’t know, is that good news?

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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 October 28, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

Will start with inventory and then we’ll look at the surprising price trends I mentioned. Inventory ticked down to 738,000 from 739,000 last week. Our model had expected inventory to climb just a bit this week. We could still see another bounce up week in inventory, but we’re near the peak for the year. Florida had an uptick in inventory with a bit of a rebound in new listings after the storms are now past. 

In this chart each line is a year. You can really see the seasonality change compared to how the market used to be. In the pre-pandemic years of the teens, inventory would peak in August and be declining rapidly each week by the fourth quarter. In those times, you either sold your house or you pulled it off the market before the holidays. So the top lines on this chart, those are the years 2017-18-19, you can see the downslope at the right end of the chart. This year has maybe only just peaked in inventory. As a result, we’re now only 21% fewer homes on the market than this point in 2019. Maybe next year, if mortgage rates stay in the high 6s, inventory will build closer to the old normal after 5 years of severe shortage. If mortgage rates fall, say into the 5s, I expect that demand will pick up faster than supply and inventory will shrink again. Keep an eye on that as we roll into 2025.

Last year when rates were rising to 8% in October, inventory was also rising pretty quickly even this late in the year. You can see the 2023 line in red here. Last year the unsold inventory of homes on the market expanded by 1.5% in the last week of October. This week it fell a bit. As a result there are now 31% more homes on the market than last year at this time. Remember that just a few weeks ago we had 40% more inventory. Last year the unsold inventory was piling up each week, this year the market is much more stable. This year’s interest rate moves are less than last years and the market now is less shocked than it was at that time.

Last year the momentum was obviously worse. Inventory was climbing and price reductions were climbing. Neither of those things is happening right now. Of course we haven’t seen home buying conditions to be really optimistic about. 

New Listings

Let’s look at new sellers this week. 2024 continues to have just slightly more sellers than last year but fewer than we used to get in the old times. There were 60,000 new listings unsold this week for single family homes. That’s roughly the same as a week ago and just 6% more than last year at this time. With the holidays rapidly approaching, the new listings volume falls off pretty sharply from here through January. This year’s line, you can see remains below the cluster of lines from previous years, and just above the last two years. Just slightly more sellers now than last year.

There were another 9000 new listings / immediate sales this week. These are the homes that got listed for sale and took offers and went into contract within just a few days of listing. They’re already in contract so they don’t add to the active inventory. There are immediate sales in any market, the best homes at the right price always go quickly, but the immediate sales pace now is down significantly from the pandemic times and that’s an indication that home buyers don’t see any urgency in making offers. Overall, the days spent on the market is 24% higher now than a year ago. 66 vs. 53 days. And that’s because there are fewer immediate sales, and then longer on the market for those that don’t sell immediately. 

When you add it all together there were just two percent more new sellers hitting the market this week than a year ago. Just two percent more. I mentioned that Florida rebounded this week with sellers that postponed for the storms, Texas and California new listings volume is ticking down as you’d expect for autumn.

So, there are slightly more sellers this year, but inventory was building faster last year. That’s because of course buyers were stopped cold last year as mortgage rates reached 8%. Today on the HousingWire mortgage rates center, we see the average rate lock coming in at 6.7%.

New Pending Sales

On to home sales. Sales rates are holding up pretty well, given the recent disappointing trend in the cost of money. There were 59,000 new pending home sales for single family homes this week with another 12,000 condo sales. The sales rate is inching lower for the season, but still performing better than the last two years. That’s what we’re looking at here. We tracked 9% more sales started this week than last year at this time. October of the last two years was really rough for home sales. The NAR headline last week reported their estimate of very low sales in September, it’ll be interesting to see if their methodology for estimating home sales catches up to the real time numbers when they report October later in November. 

Home sales are not strong of course. But we can see maybe a little normalization. Mortgage rates are120 basis points lower than they were a year ago. And sales are coming in a little better each week compared to last year and 2022. Remember that the data we’re looking at here are the homes going into contract in a given week. Homes take 30 or 40 days to close so these will mostly close sales in November and you’ll hear that data in the headlines in December and January. 

The takeaway for home sales, each week is looking better than the last two years. At some point this momentum will show up in other headlines. It’s not a lot of sales, home buyer demand is still very soft, but it is better than the very bleak Q4 2023.

Home Prices

Ok now let’s talk prices. As I mentioned, it’s been surprising especially in the second half of this year how resilient home prices have been. As home buyer demand has stayed muted, supply of unsold homes has built. I’ve talked about rising inventory, slightly more sellers each week, longer days on market, fewer immediate sales, given all this data, you’d expect that would mean that prices would be subsiding at least a bit, but in general, across the country, home prices are not subsiding. 

For a while in the late summer, we could see that expected price trend, as the market just stayed so slow. Then we got a little boost with cheaper mortgage rates in September and that’s when we had this surprising strength in the sales prices of the homes going into contract. 

The way to look at it is: Home buyers are buying homes at these prices. See this year’s line, where prices are staying around $390,000 as the median price for the new pending sales here into late October. Compare that to the price curves of either of the last two years - fourth quarter in 2023 and especially 2022.  You can really see how much more stability is in the market now. I’ve said it this way before: consumers are more sensitive to changes in interest rates than they are to the absolute levels. In 2022, rates jumped 500 basis points and home prices dipped. This year they’re up in the last few weeks but down from the peak. I think that’s the reason we’re seeing resiliency in home prices. Consumers, both buyers and sellers, are more sensitive to changes in rates than to the absolute level. And there’s less change this year. Finally. 

The median price of the homes newly in contract this week is $389,900. That is up a fraction from last week and is 6% more than last year at this time. You can see the price gap at the right end of this chart. These are the prices for all the single family homes that went into contract this week. 59,000 of them. These are not yet sold, as I mentioned, these will close in November mostly. But this is the earliest proxy for the sales price. We can see exactly when sales prices are dipping, because they dip here first. And home prices are not dipping now. 

The median price of all the homes on the market is $439,000. That’s down a tick from last week and is slightly above last year at this time. If you walk into the housing market today and want to buy a home, $439,000 is the median price. The sweet spot price that people want to pay is always slightly less than what’s available. One fascinating insight about home prices this year is that the sale-ask price ratio is much less than the last two years. In other words, buyers are showing their willingness to buy at these current prices. I may spend some more time on this pricing signal in the November webinar when we have more time in a few weeks. 

Price Reductions

We’ve been exploring today how the price signals keep defying my expectations. The leading indicators of future prices are showing a similar pattern of price stability. As of this week 39.5% of the homes on the market have taken a price cut. That’s up just a tiny fraction from last week. And has been basically unchanged for 12 weeks. See this year’s dark line bouncing along the top of the chart here.

Price reductions, while a little elevated, are not climbing. There are still slightly more homes on the market now that have taken a price cut than last year at this time. I think this relative stability reflects that no sellers are surprised by this market. As I said before, consumers are more sensitive to changes in rates than to the absolute level. Yes, mortgage rates are higher than people expected at the start of the year. But they’ve been pretty stable compared to the last two years.

The big change in rates was 2022. Two years ago, despite those of us shouting about how sellers would need to get ahead of the changing market, many sellers were nonetheless still surprised, overpriced, and had to cut their prices in the fourth quarter when mortgage rates jumped again. That 2022 line is so clear on this price reductions chart. 

It’s also true that most home sellers continue to be in a position of strength and this price reductions data is a good illustration of that fact. If your home is on the market and you’re not getting the price you want, you can cut the price or you can withdraw the listing to try again in the future. Withdrawals are a significant factor here. We’ll share the latest withdrawal data in the webinar in a few weeks. 

It’s wild how quickly the sentiment can change in a week. As of now 2024 looks like home prices are holding firm nationally and inventory is roughly peaked for the year, but what if strong economic news drives mortgage rates back over 7%?  We know that buyers can put the brakes on very quickly. So potential home buyers and sellers need to hear the data from you so they know how to act. If you need to advise people in the real estate market you should join us at Altos.

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