The seasonal housing inventory peaks and bottoms have been occurring later than usual in recent years. Last week, there was a noticeable decrease in both active inventory and new listings, which is not uncommon. However, the timing of this decline may have been influenced by the recent election. Over the past two years, starting in mid-November, mortgage rates have dropped, leading to positive housing demand data. Will history repeat itself this year?
Weekly housing inventory data
If the inventory peak has been reached, the most positive aspect of the housing market in 2024 is that there is sufficient inventory growth to accommodate demand if mortgage rates fall to 6% or below. Additionally, my model of healthy normal inventory growth, between 11,000 and 17,000 per week, has remained consistent this year. We have not seen a print over 17,000 in 2024, but there have been several prints between 11,000 and 17,000, a trend that was not seen last year.
- Weekly inventory change (Nov. 1-Nov. 8): Inventory decreased from 735,718 to 721,576
- The same week last year (Nov. 3-Nov 10): Inventory increased from 566,882 to 566,941
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 so far is 739,434
- For context, active listings for this week in 2015 were 1,140,557
New listings data
Another positive aspect for 2024 has been the growth in new listings data. Although the target level was missed by 5,000 this year, any growth is a good sign. Despite predictions of a flood of new listings due to various factors, 2024 is on track to be the second-lowest year for new listings ever. Last week, we saw the lowest new listings data in history.
New listings data can vary significantly week to week, and the recent decrease may have been influenced by the election. However, with Thanksgiving approaching, a seasonal decline in inventory is expected at this time of year.
- 2024: 48,863
- 2023: 55,327
- 2022: 52,643
Price-cut percentage
In an average year, about one-third of all homes experience a price cut, which is a standard housing activity. The price-cut percentage tends to increase with rising mortgage rates and decrease when rates are lower and demand is high. Recent data has shown a decline in the price-cut percentage, indicating firm pricing despite higher inventory levels in 2024.
Here are the price-cut percentages for last week compared to previous years:
- 2024: 38.8%
- 2023: 39%
- 2022: 43%
Purchase application data
Higher mortgage rates typically impact purchase application data, and the recent negative trend over the last four weeks is not unexpected. Purchase application data takes time to reflect in sales data, so the effects of recent trends are starting to show.
When mortgage rates were higher earlier in the year, the purchase application data reflected this with more negative prints. However, as rates fell, the data showed more positive trends. The recent increase in mortgage rates has resulted in a mixed bag of data.
Weekly pending sales
Weekly pending contract data from Altos Research provides real-time insight into demand. While there has been growth in pending sales compared to previous years, it is essential to consider the context of past sales levels. The recent slowdown in new listings data may have impacted pending sales, but a rebound in inventory could be expected soon.
Here are the weekly pending sales for last week compared to previous years:
- 2024: 336,624
- 2023: 301,768
- 2022: 314,271
10-year yield and mortgage rates
Last week saw the 10-year yield hold at 4.40%, despite the volatility surrounding the election and Fed meeting. The downward trend from 5% remains intact, ending the week at 4.31%. The impact of recent events on mortgage rates is still unfolding.
Speculation about potential mortgage rate increases under the new administration should be viewed with caution. Listening to expert insights can provide a more realistic view of future mortgage rate trends.
Mortgage spreads
Mortgage spreads have been a positive factor in 2024 compared to the negative trends seen in 2023. Despite recent spikes in mortgage rates, spreads have helped keep rates lower than they would have been otherwise. Improvements in spreads have been significant this year, contributing to more favorable mortgage rates.
The week ahead. Inflation week, retail sales, and Fed speeches
The upcoming week will focus on inflation data, retail sales, and insights from various Fed presidents on the economy. Following the recent events, it will be crucial to monitor how the bond market reacts to inflation and retail sales data, especially with the current higher bond yields. Paying attention to Fed speeches can provide valuable clues about future economic trends.
As always, labor market data remains a key indicator of economic health, and weekly jobless claims data will be closely watched for any significant changes.