Why Home Sales Will Climb in 2024

By now if you follow the housing data closely, you’ll know that inventory of unsold homes on the market is up over 2022. Inventory climbed well into November, and new listings each week are also running higher than last year. What you may not realize is that sales are now also consistently higher each week than in 2022. Supply is inching up… and so is the pace of sales.

When I say “sales” in this context, the data I’m talking about is that we track all the new contracts pending each week. These are not actually sold yet. It takes a month or two in the contract pending stage before the sales close. Right now we can count the homes that will be sold in the future. So here I’m talking about the early proxy measure for sales. And yes contracts can fail, so keep that in mind, but we don’t see any unusual spike in contracts failing right now.

So it is starting to be reasonable to expect that home sales will grow in 2024. Because each week now we have more new contracts starting than we did last year.

There are still slightly fewer homes total in contract than last year at this time. We've had a whole year of fewer sales, but each week of new sales is now outperforming last year at this time. It’ll take several more weeks or months of continued growth to really move the needle. Right now it’s just a 5% lift but it’s notable. Because every week all year was like 20 or 30% fewer sales happening; now there are 5% more. There were 5% more contracts started this week than the same week in 2022. 

Last year at this time we were looking in the data to understand if home prices could possibly crash in 2023. At the time the data told us probably no home price crash and that’s what we focused a lot of our presentation energy on. What I didn’t do at the time was properly highlight the home sales numbers. Had I been more insightful I would have spent more time on the sales volume and told you that home prices weren’t crashing but the number of sales is. I’m trying now to share both sides of the story. Sales volumes and prices.

Let’s look at the US housing market data for the week of November 27th to see what the market signals are telling us.

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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 November 27th. Please refer to the video below for all the charts I mention in this transcript!

Inventory

As we’ve discussed, inventory rose late into November this year, which is very unusual. That inventory rise is finally past us. There are now 566,000 single family homes on the market around the US. That’s almost 1% fewer than a week ago. We can now confidently say that inventory has peaked for the year and will decline into the new year. Next week the Thanksgiving numbers will be fully baked into the data and inventory will decline again of course. 

There are about 0.5% more homes on the market now than in 2022 at this time. Just a fraction more. It looks to me like sellers are more accustomed to the new mortgage rate environment and more likely to choose to move. So that’s contributing to inventory loosening up just a bit. The signal here is that consumers are more sensitive to changes in mortgage rates than to the absolute levels. And that bodes well for increases in home sales in 2024. 

The available inventory of unsold homes on the market is still 36% fewer than in 2019 and half what it was in November of 2015. We’re forecasting inventory to increase in 2024 and that seems like a good thing for all market participants. There is no flood of sellers. No evidence of a lot more inventory, but any increase in home selection for buyers will be welcome.

New Listings & Immediate Sales

I’ve been highlighting the new listings and immediate sales chart this fall. Each week we have slightly more new listings than a year prior. But of course sellers are still very restricted. This is how you know there’s no panic flood of sellers. In this chart the height of each bar is the total number of new listings each week. The taller the bar, the more sellers. I’ve included the annotations so you can see that we have slightly more sellers this week than last year at this time. 58,000 new listings, of which 10,000 went into contract already.  The light portion of each bar is what we call the immediate sales, those that got listed and took offers within a couple days of listing. 

What we’re watching for here is slightly more sellers each week, we want growth in the new listings and we want the immediate sales to not evaporate. If new listings were to shoot up, or immediate sales to stop, those would be bearish signals. We don’t have those signals, but we’re watching for them. New listing volume plummets over the holidays now and will pick back up after the new year. The trend we’re hoping for is where we have slightly more sellers this winter than we did last year and for some of those to get snapped up immediately.

Sales Rate

So, inventory is up over last year. New listings are up over last year. We have more sellers. We’ve been talking about this for weeks, so it’s pretty widely known by now. What’s not yet known is that sales are now up too compared to last year. The market has turned the corner just barely from contracting to growing.

The number of homes going into contract each week - the new contracts pending in a given week - is more now than last year at this time. That’s what we’re showing here. This chart is just the new pendings each week. The taller the bar, the more sales initiated that week. I’ve included the dotted lines so you can see that since inventory has grown, the lid on sales is starting to lift as well.

This is still a very early reversal of the year’s trend. The total number of home sales in contract is still fewer than last year. It’s just that each week is now looking a tiny bit better. We have to continue this growth trend for a couple more months, but the early trend is there. There are only 296,000 single family homes in the contract pending stage. Last year there were 304,000. In 2021 there were close to 500,000 single family homes in contract at the end of November.  This is to say, we still have very few sales completing. The headlines will continue to print record few home sales for several more months. 

The thing to recognize with this data is that the sales increase is running alongside the inventory increase. More supply seems to be leading to more sales. This is why we foresee more home sales in 2024 than in 2023.

Here’s another way to look at the growth in home sales. In this chart I’ve mapped out the new pendings volume compared to the same week a year earlier.  Most of the year the home sales rate in America was 20-30% fewer than last year. A seasonally adjusted rate that dropped from 6 million home sales per year to 4 million. In this chart I’ve drawn the line at 0%. When the data is below that, then home sales are shrinking. Fewer sales than the year prior. We started 2023 at the left side of this chart with 30 or 40% fewer contracts happening each week. But now at the right end of the chart we’re above the line. Sales are growing at a 5% pace over the same week a year ago. The longer the data stays positive, the more growth in sales in 2024. 

The trend here is clear. We had a big shock. The market went from screaming hot to very cold. We had less demand and less supply. Everything has been restricted. The data shows that’s starting to loosen up a little bit.  A long upward sloping curve. Just recently as October, even though this chart had been improving all year, we were still in a shrinking market with 5% fewer home sales each week. That’s finally reversed now. Fingers crossed that the trend continues into 2024. 

And it is important to note that the trend could indeed reverse. There’s no guarantee that the market is supported, especially if mortgage rates jump again. A reason for optimism however is the rule I mentioned earlier, that consumers are more sensitive to changes in rates than to the absolute level of rates. Rates have had incredible volatility in the last 20 months. So if mortgage rates in 2024 prove more stable, that would support this trend of improving sales.

Home Prices

We’ve focused today on the number of home sales happening. The industry has been in deep recession, so these are signals that we’re finally emerging. The factor that consumers care about though is home prices.  While home sales had a huge drop, home prices in 2023 had a soft landing. The median price of single family homes in the US is 1-3% higher than last year.  Homes have been trading in this range for a few months and look to finish the year with these small gains. 

In this chart the dark red line is the median price of all the single family homes on the market in the US. That’s $425,000 this week. That’s down a fraction from last week as is normal for November. I’ve annotated the chart so you can see how the market compares to last year at this time. Home prices are just a little bit higher. 

So now we can foresee sales picking up in 2024. What happens to prices? It looks to me like the most optimistic scenario for home prices in 2024 is a repeat of this year. More likely is I see flat to down prices by a few percent in 2024. Affordability is not improved. Demand is still low. There’s still a big risk of recession and rising unemployment. Nothing bodes well for home prices. Remember we expected those things in 2023 and the economy grew unexpectedly strong so home prices avoided a drop. If mortgage rates fall substantially, that’d be the one factor that would spur demand more than supply, inventory would fall and push home prices up. I don’t predict mortgage rates. They could go up or down from here.

Likewise, the leading indicators on home prices are not strong but they’re not deteriorating in recent weeks either. In this chart the bright red line is the price of the new listings and that’s showing slight improvements over 2022. 3.3% higher. The new listings each week are a leading indicator of where future sales will take place.

I’ve not included the price reductions chart today but price cuts have peaked and are now ticking lower for the holidays. The market has fewer price cuts than last year, so that’s a little better, but the number of sellers who had to cut prices in the face of weak demand is still higher than normal. So there are no bullish signs for home prices. Just less bad than last year. 

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