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The seasonal housing inventory peaks and bottoms have happened later than usual in the past few years. Last week, we saw a noticeable decline in both active inventory and new listings, which isn’t abnormal, but we might have had an election variable here. In the past two years, starting in mid-November, mortgage rates have fallen, and we have seen positive, forward-looking housing demand data. Will that be the case again?
Weekly housing inventory data
If we have seen the peak for inventory, the best housing story in 2024 is that we have healthy enough inventory growth to handle demand if mortgage rates drop to 6% or below. Also, my model of healthy normal inventory growth — between 11,000 and 17,000 per week — has stayed consistent this year, as we haven’t seen one print over 17,000 in 2024 but a few prints between 11,000 and 17,000, which is something we couldn’t do at all last year.
- Weekly inventory change (Nov. 1-Nov. 8): Inventory fell from 735,718 to 721,576
- The same week last year (Nov. 3-Nov 10): Inventory rose 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 some context, active listings for this week in 2015 were 1,140,557
New listings data
Another positive story for 2024 has been the growth in new listings data. Yes, we didn’t hit my target level this year — we missed by 5,000 — but growth is growth. Remember all those years of stories by fake housing experts that we would see a flood of new listings due to the Silver Tsunami, Airbnb bust, and stressed-out home sellers? 2024 will be the second-lowest year for new listings ever. And last week, we had the lowest new listings data in history.
New listings data can be very volatile week to week, and this last week was a big dive. Maybe some people decided to wait to list their house until after the election. However, it’s almost Thanksgiving and a seasonal decline in inventory at this point is common. Here’s the new listings data for last week over the past several years:
- 2024: 48,863
- 2023: 55,327
- 2022: 52,643
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. When mortgage rates rise, the price-cut percentage grows. When rates go lower, and demand picks up, this data line can cool down, as it has recently.
A few months ago, on the HousingWire Daily podcast, I predicted that price-growth data would cool down in the year’s second half. I have been wrong in this assessment, but our pending new price index finally had a seasonal decline last week.
I was 100% surprised that pricing has stayed as firm as it has in our weekly data with our inventory levels. The price-cut percentage declined earlier in 2024 than in the two previous years; lower mortgage rates did their thing. However, as you can see, with more inventory in 2024, it’s a more modest move.
Here are the price-cut percentages for last week over the previous few years:
- 2024: 38.8%
- 2023: 39%
- 2022: 43%
Purchase application data
Higher mortgage rates always impact the purchase application data, so the fact that the last four weeks have been trending negatively isn’t surprising. Purchase application data takes about 30-90 days to hit the sales data, so it would be around now that we see the hit.
When mortgage rates were running higher earlier in the year (between 6.75%-7.50%), this is what the purchase application data looked like:
- 14 negative prints
- 2 flat prints
- 2 positive prints
When mortgage rates started falling in mid-June, here’s what purchase applications looked like:
- 12 positive prints
- 5 negative prints
- 1 flat print
- 3 straight positive year-over-year growth prints
With mortgage rates up again, here is where we are:
- 3 negative prints
- 1 positive weekly prints
- 4 straight weeks of positive year-over-year data, but the bar is low for this.
Weekly pending sales
Below is the Altos Research weekly pending contract data to show real-time demand. This data line is very seasonal, as we can see in the chart below, and we should remember how high mortgage rates were at this time last year. We are now showing growth versus 2023 and 2022 data in this data line, but context is critical. 2022 sales had the fastest crash in sales ever, and 2023 home sales were at record low levels, so take the growth in context with those two truths.
Higher mortgage rates are kicking into the weekly data of the pending contracts. I was surprised by the steady demand last week, but we can see a slowdown here in new listings data. Maybe there was an election delay previous week; if that’s the case we will see a small comeback in inventory next week.
This is the weekly pending sales for last week over the previous few years:
- 2024: 336,624
- 2023: 301,768
- 2022: 314,271
10-year yield and mortgage rates
My 2024 forecast included:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
The main thing about last week is that the 4.40% level held on the 10-year yield. It was a wild, whacky week with the election and the Fed meeting. However, the downtrend from 5% is still intact for now.
After the election, things calmed down and even more so after the Fed meeting, to end the week at 4.31% .
There has been some talk that President-elect Trump’s economic policies will create 8% plus mortgage rates. I encourage everyone to listen to this HousingWire Daily podcast we recorded after the election to try to bring some reality to the mortgage rate discussion going out for the next four years.
Mortgage spreads
The mortgage spread story has been positive in 2024, whereas it was negative in 2023. We have already seen a big move this year; mortgage rates would be much higher today without the spreads improving. Unfortunately, the spreads have worsened with the recent spike in mortgage rates. Still, if I took the worst spreads from last year, mortgage rates would be 0.65 % higher today. If mortgage spreads were back to normal, you would see mortgage rates lower by 0.78%—0.88%.
The week ahead. Inflation week, retail sales and Fed speeches
It’s inflation week again! We will also have retail sales and a few Fed presidents will be giving their take on the economy. After all the drama we had last week, I want to see how the bond market reacts to the inflation data and retail sales now, as bond yields are much higher than the day the Fed cut rates in September.
Also, we always want to watch Fed president speeches and their terminology for clues on the future. Again, as always, it’s labor over inflation. Keep an eye out for jobless claims data each Thursday; that’s their extensive labor data line and the one the bond market will follow.
