I was expecting that this would finally be the week that inventory started rising across the country for the spring buying season. But instead, inventory fell again. In most of the county, inventory levels have returned to the their pandemic-era lows. This is because there are very few people interested in selling homes they already own.
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I’m Mike Simonsen, I’m the founder of Altos Research. Here’s the latest data as we roll into the second half of April.
This week there were only 66,000 new listings of single-family homes, and 25% of those are already under contract. This week last year there were 100,000 new listings, and 30% of them went into contract immediately. So yes, demand is lighter than the insanity of last year. But the quantity demanded exceeds the quantity supplied. There are plenty of buyers competing for the limited supply of homes on the market.
In the video above, check out the chart of weekly new listings volume - you can see the spigot turned off on July 4, 2022. The seller volume dropped, and it has not recovered. This chart also shows how in normal times sellers are ramping up each week in the spring. At the right end of the chart, the data does not show that happening this spring.
There are three groups of potential sellers:
1. Life event movers.
These sellers are either moving up or moving down. What we know is that fewer people are moving, they’re staying in homes longer. This group is the mortgage lock-in group. It’s hard to change from a 2.8% mortgage to a 6% mortgage. Some of them will even hold on to their low-mortgage home when they have to move. For example, my brother is moving across the country to take care of his in-laws. His family will buy in Pennsylvania, but they’ll keep the ultra-cheap mortgage they have in DC. As a result, there is less inventory.
2. Investors.
Investors have purchased millions of homes across the U.S. in the last decade. We can observe that the biggest investors, the big institutional money has dramatically slowed purchasing, but none are selling their properties. There is no discernible inventory coming from investors.
3. Distressed homeowners.
When you lose your job, or your income doesn’t keep up with inflation or other economic stress, you might be forced to sell. This group was the source of inventory in the 2008 crisis. As of right now, the U.S. still has near-record employment levels. Even the big layoffs in the tech sector are generally finding work quickly. So as of now, none of these people are selling either.
Every week the data continues to prove that homeowners have a really good deal, and they know it. This low-supply market will continue until something dramatically changes.
There are now just 405,000 single-family homes on the market across the country. That’s 57% more than last year at this time, but every week the difference is compressing. We could be back at record few homes on the market by the third quarter. Now, I don’t think that will happen, I continue to expect that inventory will build a little soon. Especially if the economy finally slows later this year, I’d expect inventory to climb then.
The fact is that most of the home buying happens before a June 30 peak, and we’re rapidly approaching that supposed “peak” for the year. Inventory usually climbs for 20 weeks from mid- February through June 30. We’re halfway through the seasonal cycle and yet inventory is still falling.
The tight inventory has not resulted in prices rising, but it has stopped prices from falling. Supply is tight, but affordability still restricts demand compared with 2022.
There are maybe just a few markets where prices still are moving down. For example, home prices in San Francisco proper are still declining. Tech job losses, remote work and lack of affordability are driving so much of that price reduction. But the Bay Area metro — which covers 8 million people and 5 counties — is much more diverse and has stabilized from 2022.
The median price of single family homes in the US is $439,900 this week. That’s unchanged from last week and is still a fraction higher than in 2022 at this time.
Two of the three Altos price measures are lower than last year at this time after the declines of the second half 2022. What’s happening is that last spring prices were still jumping each week. Prices corrected down just as quickly in the second half of the year. And now they’re inching up. But the year over year comparisons get more negative each week.
The median price of the new listings is couple percent lower than last year at this time. The median price of the new listings now is $399,900, that’s down a tick from last week. In the chart (see this week's video) you can see how the spread between the light and the dark lines is staying wide this year. Last year due to the insatiable demand, the price of the new listings was still jumping each week. The price of the new listings is a little noisy and jumps around a bit, but in general the price comparisons with last year will continue to get worse until probably July or so. Showing about 0—5% price decline from last year.
The third way to look at home prices is with those homes in contract, the pendings. The median price of the pendings ticked up this week to $379,000. That’s also lower than last year at this time. These are the homes currently under contract for which the sales will happen in April, May and June. Remember that the buyer demand we can see now in the data doesn’t show up in the headlines until July or August for the sales numbers. And the headlines we hear now reflect buyer demand from back in November, December, January.
The seasonal peak of prices is in June. And like the other price indicators you can expect that our year over year comparisons will get worse until July. Last spring was the rocket. You can see the light line in this chart is the pendings prices each week last year. Prices this year (the dark red line) have been at or below last year since mid February. And since last year had bidding wars and overbidding the sales prices came in higher than this. So we can see that home prices are a few percent lower than last year at this time. And that the headlines reporting negative home price change will keep coming for several more months, even though the pendings prices are actually ticking up.
This is because those price corrections happened in the second half of last year. What we can see now is that demand is currently higher than the available supply. Fewer homes are taking a price cut each week. 29.8% of the single family homes on the market have had a price cut. That’s a fraction fewer than last week. It’s going to be fascinating to see if this demand indicator continues to improve and surpasses the 2019 levels in the next few weeks. Does the dark red line here go below the blue in the coming weeks?
A few weeks ago Redfin released a report that pointed out that home sales completed in February had the most price cuts on the record in their data. And that highlights an interesting nuance difference between our datasets. In this chart, we’re watching the active market. 29.8% of homes have had a price cut. That Redfin report was measuring the sales that closed in February. Homes that were on the market and cut their prices in November and December to get their offers. Those sales closed in February. See the peak of this chart is late November last year. The light red line. What we also know is that when Redfin releases the same report for March sales, the price reductions will be fewer. April sales fewer still etc. We can see all the way until June sales data which we’ll see in July.
The takeaway here is this: We can already see the price strength in home sales all the way through mid summer at least. If you have a hypothesis about home prices falling in 2023, that trend can’t even start until the 3rd quarter at the earliest. Keep that in mind. Home prices for 2023 are not showing any signs of further price decline. It all happened in 2022. Maybe that changes later, but not yet.
I did a great podcast interview with Redfin’s Taylor Marr a couple weeks ago where we talk about this. Click here to check it out.
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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