Unsold Inventory is Rising Across the Country

It’s the end of May, and unsold inventory on the market is increasing across the country. Every state has more homes on the market now than a year ago. In many places we’re seeing new construction getting completed and adding to inventory, so it’s not just resale inventory growing. 

There are more homes on the market now than any time since August of 2020. We’ll probably peak at around 700,000 this summer and cross over 2020 at that point. 

New listings also climbed for the week. 72,000 single family homes are newly on the market. I thought we might be on the decline already with the new listings volume, but that pace picked up a tad this week, which is encouraging to me. I like signals of more sellers. More people coming off the sidelines is healthier for this market. 

We have to keep watching the sales rate too, of course. Don’t want a scenario where there’s a flood of sellers but no buyers. So it was encouraging that the new pendings ticked up just a bit this week after having declined for several weeks in a row.

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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 May 27, 2024. Please refer to the video below for all the charts I mention in this transcript!

Inventory

There are 595,000 single family homes on the market now. That’s up almost 3% on the week and 37% more homes unsold on the market now than last year at this time. Every state in the country now has more unsold inventory than a year ago. Some states like New York are only a fraction more unsold homes now than last year.. Some states like Florida have 65% more homes unsold. But basically everywhere in the country inventory is still climbing this summer as mortgage rates are still around 7%. Higher rates creates more inventory.

Rates have eased down in the last few weeks. Maybe sneaking back under 7%. We’ve had this trend with expanding inventory - these are homes on the market unsold - that’s been building all year. And the trend will continue until mortgage rates drop notably. 

With nearly 600,000 homes on the market, that’s more than any time since 2020 at the start of the pandemic. In a few weeks, probably early July, the inventory will finally surpass the 2020 levels. Inventory will peak in late summer, then it’ll crest for the year, and finish 2024 with about 620,000 single family homes on the market, which would be about 20% more than the year prior

In this chart you can see the dark red line illustrating unsold inventory for 2024 is consistently trending higher. And you can see how we’ll cross over the gray 2020 line by July. You can also see the light red line from 2022 when rates were first skyrocketing, that’s when inventory started climbing off the record low levels during the pandemic. 2022 inventory was building much more quickly than it is now. Rates were jumping and inventory was jumping.

It seems like there’s maybe a chance now that mortgage rates finally start receding in the second half of the year. If mortgage rates fall substantially quickly, you’ll see the slope of this year’s line level off as home buyer demand picks up with affordability. I’d expect that demand to be very notable with rates around 6.5% for the 30 year fixed. 

New Listings

There were 72,000 new listings this week. That’s up several percent over last week and the most new sellers of any week all year. This is good. It’s a reversal from what I assumed last week. Seller volume had been inching down for three weeks and it looked like we’d passed the peak new listings rate for the year. But this week it jumped.  And as I’ve said, I like any sign of growing seller volume to help this market. Most years the New Listings volume peaks in the second quarter. So hopefully we get a little more runway before the new listing volume tapers off in the second half. 

There were 72,000 new listings unsold and another 18,000 listings that are already in contract - 18,000 immediate sales. That makes 90,000 total sellers this week. And there are 10% more sellers than a year ago. In 2022 though there were 108,000 new listings in the week. This is important context because it helps us see that total home sales will necessarily be capped. There just aren’t enough sellers yet. 90,000 total new listings this week vs 108,000 two years ago. 20% fewer now. But the seller volume is growing. And that’s why I saw the jump in sellers is good. Any growth in the market is good from the incredibly restricted pace we’ve been on. 

The big three states: Texas, Florida, and California all have about 20% more new listings each week than a year ago. The South has been leading the growth in inventory this year. But California is picking up pretty quickly. That’s something to keep a watch on.

Pending Sales

There are 404,000 single family homes in contract now. That’s up almost 1% from last week and about one and a quarter percent more than a year ago. A few thousand more homes are in contract to close in June than there were a year ago. Just a few thousand.

There were 68,000 new contracts started this week. That’s up almost 1% from last week and 4% more than a year ago. It was nice to see the new contracts tick up this week, though it looks like April might have been the peak for that measure of home sales. The peak for the year so far was a few weeks ago when we had 78,000 new contracts started in a week vs 72 this week. We’ll get a couple more weeks in June with contracts potentially growing before the market recedes after the July 4 holiday. There’s usually a spike in offers that happens before the July 4th holiday. So hopefully we’ll see that this month. 

In this chart each bar is a week. The higher the bar the more homes are selling. These 404,000 single family homes are in contract now and these are sales that will close mostly in June. The light portion of each bar are the new contracts started that week. It’s nice to see the light portion, the new sales started, grow. We’ve added the dotted line so you can see where the market is compared to last year at this time. And right now, it’s just a tiny bit of growth. 

Price Reductions

Now 34.8% of homes on the market have taken price cuts. That’s up 40 basis points from last week. And is about 450 basis points above last year at this time. Not only are price cuts elevated compared to last year, each week more price cuts are happening than last year at this time.

As inventory has built, and demand slowed with higher mortgage rates this year, the houses sitting on the market need to cut their asking prices. It’s normal for every market to have price cuts. But as more than a third of listings have to cut their prices, or as this trendline approaches 40% which is the path we can see now, that’s really indicative of continuingly slowing demand. You could imagine by July we have more than 40% of the homes on the market with price cuts. That’d be a bearish indicator for future sales prices.

In this chart if you follow the slope of the dark red line up for another month or two you’ll see how the market may approach 40%. These are leading indicators for sales that will happen in the future. 

And mortgage rates can change this trajectory. Price cuts are elevated this spring because rates have stayed higher for longer. If rates drop substantially, you’ll see the subsequent pickup in home buyer demand show up in this stat with fewer price cuts. Keep a lookout.

Home Prices

Since price reductions are a leading indicator of future sales prices, I’m watching all the price signals to see if home sales prices are yet showing weakness.  While I’ve been sharing for a few weeks that it looks like there’s weakness in future sales prices, most of the home price measures do not yet show receding home price growth. Most indicators are still showing 3-4% growth over last year. We’re keeping our eyes on whether those measures are trending lower toward zero. Not yet, but it's worth watching.

The median price of all single family homes in the US on the market now is $454,000. That’s up almost 1 percent for the week. And it's like I said a touch more than last year. 

The median price of the homes in contract is $400,000 which is still like I said almost 4% more than a year ago. I’m showing the pendings here. The dark line is this year. These are all the homes that are in escrow right now. These are sales that will close mostly in June. So, we can see that they’re almost 4% more expensive than last year at this time. You’ll see in the chart how home sales cluster around the big round numbers. The median price of the pendings has been basically at $400k for 8 weeks.  You can see a long stretch at $375k in the light red line in 2022 also. Since sales cluster around the round numbers, the median is the middle of all them. So it’s more likely that the median is that same number for several weeks in a row. Right now we’re at $400k.

You can also see in this chart how we’re probably at peak pricing for the year. Starting in June or July, prices will start ticking down for the second half of the year. I’m watching this chart of pending home sales prices because this is the earliest proxy for sales that will close in the future. In 2022 it was a really clear signal when prices were falling sequentially. See the gray zones here. In June and again in October of 2022 we could see very clearly the effect of the rapidly rising interest rates of that time. 

I’m watching for that again now. Here’s the thing: it seems like we might be finally past the peak mortgage interest rates. Rates have been inching downward. The latest inflation data came in positive. So, the question is at what level is buyer demand stimulated and does that impact prices? Or what if inflation surprises the other way and  mortgage rates rise again. How quickly will that impact home prices? It’ll be quick and we'll see it right here. 

And that’s why we do this data work each week. This market is trying to grow, but homebuyers are obviously sensitive to the cost of money. If you aren’t watching the data each week, you’re probably behind the curve. You have buyers and sellers who have no idea how this market is changing right now. They need to hear the data from you. If you need to help buyers and sellers see the actual data, you should join us at Altos.

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