Will home sellers win the tug of war with buyers?

In this week’s data, inventory came in unchanged from last week. That was a little surprising to me - I had expected some inventory growth across the country, because buyers have stopped cold with the spiking mortgage rates. But instead what we’re seeing is a tug of war between buyers and sellers. Sellers just have no need to sell now. 

Inventory was flat or down most everywhere across the country. It’s up in Austin and Phoenix - two of the arguably hardest hit markets. The Florida markets Ft. Myers, Tampa and Orlando all obviously had fewer homes newly listed this week due to the hurricane, so inventory fell in those markets by a few hundred each. This is notable but not enough to move the needle nationally.

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I’m Mike Simonsen, I’m the CEO of Altos Research. Here’s what the data looks like for the week of October 10  2022.

Real Estate Inventory

Available inventory of unsold single family homes is unchanged from last week at 561,000. As I mentioned, that was a little surprising to me, as we saw three weeks of inventory rising as buyers reacted abruptly to the dramatically higher interest rates. It’s like the sellers take a few weeks to notice that there are no buyers. Now the sellers have recalibrated and decided not to sell. We have very few new listings this week. About 20-25% fewer than normal. Only about 58,000 new single family listings by our count. There are of course a lot fewer sales happening than normal too. So inventory stays flat. In the next few weeks new listings volume will continue to drop so inventory should start to fall back for the rest of the year. If you’ve been paying attention, you’ll know we still anticipate starting 2023 with a shortage of homes for sale. It’s kinda shocking that we’re in this scenario, but that’s what it looks like. 

Anecdotally, if I just look in the neighborhoods around my home, I can see very few active listings, some that were on the market sold, others were probably withdrawn, maybe they’ll try again in the spring. But there’s nothing on the market. And that seems unlikely to change at least until the spring.

Home Prices

Home prices across the country are receding each week now. The median price of single family homes in the US is $434,000. This will be closer to $400k by the end of the year and be 10% higher than where last year ended. Prices are falling quickly enough now that it you can see how next year will be flat at best. The people forecasting significant home price declines in 2023 are also assuming deep recession and rates staying elevated. So when I talk about home prices being flat in 2023 that’s based on what we can already see in the market. We can see inventory up year over year, price reductions high. At Altos we don’t forecast the economy, jobs, or mortgage rates, and those are big variables that will come into play over the next year. We focus on what we can see in the housing data already. 

Price of New Listings

And one of those signals is in the new listings each week. The median price of the newly listed cohort ticked down to $385,000 this week. Lots of room for this metric to fall too. Each week the price of the new listings is falling pretty quickly. It’s late in the year so it isn’t uncommon for new listings to discount before the holidays, but these are pretty bearish moves each week. It’s the opposite signal from what we saw in the fall of 2020 and 2021.

Immediate Sales

The falloff in immediate sales is pretty dramatic in the last few weeks. There are always some that go quickly, but during the pandemic it was crazy. Over 30% of the new listings went into contract essentially immediately after listing. Now we’re down to only 16% or about 10,000 homes in a given week. You can imagine that these are unique properties, rarely available, in difficult to find neighborhoods. The kind of buyers who maybe are not impacted by mortgage rates. 

Home Price Reductions

Price reductions are the last leading indicator we’ll watch today. The pace hasn’t slowed down. This tells us current sellers have more price cuts to expect to try to move the house before the holidays. The second week of October is traditionally the peak week for price cuts. But it looks like November at least before this peaks and resets for the holidays. We’ll see how much more this year goes. At this point, price reductions look pretty bearish for future sales prices. Again this is another indicator that home prices will probably fall in 2023 - that’s even without accounting for a recession.

Ok that’s all the data we have time for this week, see you next week.