During the past year, we witnessed a shift in the mortgage rates from 8% to the mid-6% range, leading to a moderate increase in demand. However, it was not a remarkable spike. Nevertheless, the lower rates did contribute to a combined growth of 500,000 home sales in the first two months of this year. As we commence this week, I am eager to observe if we can experience a traditional surge in purchase applications earlier than usual.
Recent data shows a 2% weekly increase and a 1% year-over-year rise in purchase applications. The stagnant year-over-year figures from the period when rates were approaching 8% have now come to an end.
When mortgage rates were higher earlier in the year (ranging from 6.75% to 7.50%), the purchase application data reflected:
- 14 negative reports
- 2 neutral reports
- 2 positive reports
Conversely, as mortgage rates began to decline in mid-June, the purchase applications exhibited the following trend:
- 12 positive reports
- 5 negative reports
- 1 neutral report
- 3 consecutive positive year-over-year growth reports
With mortgage rates on the rise again, the current scenario is as follows:
- 3 negative reports
- 2 positive weekly reports
- 5 consecutive weeks of positive year-over-year data, albeit against a low baseline.
Weekly pending sales
The weekly pending contract data from Altos Research illustrates real-time demand trends. Despite the elevated mortgage rates, this data continues to exhibit consistent year-over-year growth. It is noteworthy that the latter half of 2022 witnessed a significant decline in home sales, and last year saw rates nearing 8% towards the end of the year. Nonetheless, the ongoing growth in this data line is a positive indication.
Weekly housing inventory data
Recent trends in housing inventory and new listings have been intriguing. The unexpected decline in inventory two weeks ago, coupled with subdued new listings, suggests a potential impact from external factors like the recent election. While a rebound in inventory was anticipated last week, the actual numbers fell short of expectations.
If you seek to comprehend the nuances of the current inventory data and address misconceptions, especially in light of comparisons to the 2008 housing crisis, this article provides valuable insights.
- Weekly inventory change (Nov. 8-Nov. 15): Inventory increased from 721,576 to 722,032
- Corresponding week last year (Nov. 10-Nov. 17): Inventory rose from 566,882 to 569,898
- All-time inventory low in 2022: 240,497
- 2024 inventory peak so far: 739,434
- For context, active listings during this week in 2015 stood at 1,135,684
New listings data
Despite expectations for stronger growth in new listings data last week, the reality depicted a seasonal decline. Nonetheless, the positive trend in 2024 highlights progress in the housing market, although it should be noted that this year marks the second-lowest figure on record.
- 2024: 51,832
- 2023: 48,610
- 2022: 46,916
Price-cut percentage
Price-cut percentages in the housing market typically fluctuate, with around one-third of homes undergoing price reductions annually. These percentages tend to rise with increasing mortgage rates and decline as demand surges, as observed in recent data.
Here are the price-cut percentages for the previous week over the last few years:
- 2024: 38.8%
- 2023: 39%
- 2022: 43%
The week ahead: Housing data and the Fed’s Austan Goolsbee
Looking ahead to the upcoming week, a key focus will be on housing data, particularly the builder’s confidence and housing starts figures, which are integral to economic cycle analysis. With housing permits and starts already at levels reminiscent of the early COVID-19 recession period, attention is drawn to the builders’ sentiment towards higher mortgage rates. According to economic models, a decline in residential construction employment could signal an impending recession. This topic was recently discussed on CNBC. Additionally, insights on the housing market outlook for 2025 were shared on the Top of Mind podcast with Mike Simonsen.
Furthermore, Chicago Fed President Austan Goolsbee’s perspectives will be of interest, given his dovish stance compared to other Fed officials, as he questions the recent uptick in long-term rates. Exciting developments lie ahead, so stay tuned for more updates.