The last week of June is typically the peak of the home buying season, when activity and prices start their seasonal decline. So this first week of July, I'm looking at what we can we see for the rest of 2024.
Home prices are unchanged this week. New listings volume peaked a few weeks ago and while there won’t be a big drop off for new listings in July, in general we can assume fewer and fewer sellers each week from here on out for the rest of the year.
Home prices will probably dip after next week. The seasonal peak of home prices is usually June 30th.
Now, because home buyer demand is slow this year, available inventory of unsold homes will continue to climb through probably the end of Q3. So even as new listings tapers off and as prices ease back down, the unsold inventory count grows for a few more months.
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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 July 1, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are now 646,000 single family homes unsold on the market around the US. That’s up 1.8% for the week. And is 39% greater than last year. That’s an increase of 11,000 unsold homes for the week, that’s a pretty big gain. A little more than we projected for the week. And I think it illustrates continued, very soft home buyer demand. It seems quite likely that inventory will continue to expand until October. In years before the pandemic, inventory would have peaked in August, but it seems like that seasonality has shifted later in the year now. This is especially true if mortgage rates keep pushing higher, which it looks like they are now. Higher rates creates more inventory.
In the inventory chart below you can see that by next week or so, we’ll have more unsold homes on the market than any time since the early pandemic. In July 2020, having only 646,000 homes on the market was shockingly low. Now it seems like a lot. It’s not a lot, but the longer mortgage rates stay higher, the closer we’ll get to those old-normal levels of selection for home buyers.
So as we look at inventory for the rest of the year, expect that the market will peak in October with roughly 700,000 single family homes in unsold inventory. And end the year with roughly 20% more homes on the market than 2023 ended. 2023 remember had a late year surge of inventory growth when mortgage rates pushed over 8% in October last year. If we have another surge in rates like that, we’ll end 2024 with 30 or 40% more homes on the market than the previous year.
There were just under 71,000 new listings of single family homes unsold this week. That’s down 1.5% from a week ago. Slightly fewer sellers. Add in the 15,000 immediate sales and that totals 86,000 sellers. That’s not very many. It’s 8% more than last year at this time, but it’s not a lot. And it’s not climbing.
There won’t be a big drop off in new listings volume in July. We could see another couple weeks in the 70s. A week with 70,000 or more new listings unsold. There haven’t been any signs of sellers accelerating. There’s no sign of suddenly a lot of sellers in August or something. The question really is: how rapidly do the sellers pull back?
It’s helpful to compare this year to 2022 and 2023. In 2022, inventory was really jumping at the end of June - that was accelerating sellers and slowing buyers. Both were happening. But after July 4th 2022 the sellers pulled back and suddenly the inventory imbalance was a lot more balanced. You can see that seller pullback in the light red line in the middle of the chart here.
In 2023 the sellers stayed away all year. That seller drought was the biggest story of 2023.
Now we’re getting elements of both trends. If this market is going to get fully out of whack, that would need more sellers hitting each week and we just don’t see it. Inventory is building because of demand weakness.
Maybe you’re of the view that the housing market will get hit again with supply when people lose their jobs, that finally we’ll see seller growth once a recession hits. That may be true. But two things to keep in mind if that is your hypothesis: first is that it is not in the data now. There are no distressed sellers yet.
The second is it usually takes a year after the spike in unemployment before we see a significant surge in inventory. Unemployment is inching up now and let’s say the worst case scenario for the economy hits and companies downsize rapidly in the second half of 2024. That really means that it’s late 2025 or even 2026 before we see that distressed inventory hit the market. It could come, but we’re probably looking at 2026 now before we see it.
There were 67,000 new contracts started for single family home sales this week. That’s a fraction fewer than last week. And basically unchanged from a year ago. So even as new listings volume isn’t growing, neither is the sales volume. There is very little encouraging in the demand side of the data now.
What’s this mean for the rest of the year? It means that home sales levels will stay around this 4 million annualized rate. This sales rate is a lot lower than I expected at the beginning of the year. And that’s a function of mortgage rates staying higher for longer. Six months ago it looked like buyers were going to see some affordability improvements and therefore transactions would increase. But mortgage rates are higher than they were a year ago, higher than they were 6 months ago. And they’re heading up this week. Buyers haven’t caught any break and they know it. So right now we don’t see any evidence of home sales volumes increasing.
The median price of the home sales that started this week is $395,000. This is the price where people are buying homes. Home prices peak in June, so you should expect this number to track lower in the next few weeks and months. The question is how steep is this curve decline in the second half of the year. Two years ago we were seeing rapid deterioration in home prices as mortgage rates spiked. I’ve highlighted in gray the two points where home prices dropped in 2022. Last year the decline in prices in the second half of the year was much more muted so we ended 2023 with home price gains over the previous year.
What I’m expecting now is that the dark line has a steeper decline than the red line as 2024 finishes so that by the end of the year with very little home price appreciation over 2023. These are my expectations, but it’s notable that that compression hasn’t really started yet. I expect it to start, but so far through July 1 you can see the pending sales prices, the dark line here, are still plateaued about 3-4% higher than a year ago.
Meanwhile the median price of all the homes in the US is $455,000. That’s unchanged from last week and from last year. With this measure Altos simply counts every home for sale in the country and takes the median price of those. As a leading indicator of future sales prices, the asking price is stable but has not started declining. I keep expecting it to do so, at least a little bit.
The median price of the new listings this week was $429,000 that ticked up for the week and is nearly 4% higher than last year. New Listings prices will drop with the July 4th holiday and then generally recede for the rest of the year.
As mortgage rates stay elevated, home buyer demand remains very soft. And as a result, price cuts are still obviously climbing around the country. 37.6% of the homes on the market have taken a price cut from the original list price. That’s 70 basis points more than last week. It’s pretty high, though not disastrously high. It’s rising pretty quickly though not disastrously fast.
At this point in 2022 when mortgage rates were first rising so quickly, price reductions were also jumping at a pace of 140 or 150 basis points each week. Right now they’re rising by 50-70 basis points each week. That 2022 run-up led to home price declines in Q1 2023. About a 6-8 month lead time. The run-up now is softer but still real.
So when we look to the future based on what we can see here this is why I continue to expect flat home price appreciation in the second half of the year. It’s actually hard to make this call for me, because many of the price measures, like the pending sales prices above, haven’t started compressing yet. I expect them to, but they haven’t. Or you hear the headline home price data and it’s still at record highs. Like Case Shiller last week. I expect this to change, but it hasn’t changed yet. I always have to ask myself, when do you change your expectations based on new data.
But that’s what we’re looking for in the second half of the year. These leading indicators point to home price weakness even if the contemporaneous measures haven’t really started receding yet. Keep your eyes on this data! I’ll either be correct soon or I’ll have to form a new view.
And that’s why we do this data work each week. Homebuyers are obviously sensitive to the cost of money. And mortgage rates stayed higher for longer than anyone anticipated this year. They haven’t come down yet. What if they do? 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. You should join us at Altos.
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