Any sales growth momentum in the real estate market we might have had early in the year is gone. New home sales contracts are coming in pretty consistently fewer than last year — 4.9% fewer in the most recent week. Our Immediate sales measure of homes that get listed, take offers and go into contract in a few days is also notably lower than last year.
On the supply side, new listings are slightly more than a year ago, but pulling back. If fact the “coming soon” pre-listings are now running behind last year by 5%. That implies a continued slow down for home sales in the second half of the year — fewer buyers and fewer sellers, too.
I wonder whether the 2024 housing market is beyond saving? Are we past the opportunity for declining mortgage rates to help demand and pick up home sales growth? Let’s look at the details of the U.S. housing market at the end of July 2024.
Inventory is slightly up since last week
There are 677,000 single-family houses unsold on the market right now, plus another 180,000 condos. That’s up 1.3% over last week. Inventory continues to climb each week, which is normal for late July. We’re expecting for inventory of unsold homes to peak around October and decline for the holidays. The peak of inventory looks like it’ll be about 700,000 single- family homes. We’ll finish the year about 620,000. That’ll be a 20% increase over the end of 2023.
Right now, there are 40% more homes unsold on the market than last year at the end of July. As mortgage rates rose late in the year last year, so did inventory. This year, I’m not expecting that late-year surge, so the growth over 2023 will subside a bit. Inventory is up in every state, and several states have more unsold inventory now than in 2019.
New listings continue with recent trend
There were 68,000 new listings of single-family homes this week. There are fewer sellers than normal, and slightly more than last year, but the gap from last year is closing. Sellers seem to be backing off. I’d guess sellers are as tired waiting for mortgage rates to fall as buyers are.
In Texas, for example, there were 8,300 new listings for single-family homes this week and that is almost exactly where it’s been in late July for several years. Earlier in the year, Texas had a around 10% more new listings every week than in recent years. That’s not true any more as 2024 shifted from a growing number of sellers to flat compared to last year.
Florida and Arizona show a similar pattern. These states led the inventory growth with new supply and weak demand early in the year but no longer have that supply-side momentum, so unsold inventory is not growing.
Nationally, 68,000 new listings this week are unsold, plus another 14,000 new listings that went immediately under contract. That number — 14,000 immediate sales — is very low compared to the last few years in July. Overall, there were just 4% more sellers this week than the same week a year ago. Seller momentum has evaporated.
Coming soon listings slow
“Coming Soon” is a marketing technique that is only used in some places by some agents on some homes. These are homes that will be listed in the future. They’re doing pre-marketing. We can use this as a leading indicator for future listings. The trend on Coming Soon was super high in June 2022 when everyone was hurrying to get the house listed as mortgage rates were spiking. It dropped after July that year. This year, we saw some seller momentum early in the year, but it’s now back down to last year’s extremely low level. This is another indicator that there’s no late year surge of inventory in the works.
Pending home sales
Even as we can see no big surge of inventory coming, sales are still down and haven’t recovered. It seems like there’s just no incentive to buy right now. Rates are down from their peak, but not down that much. If you’re buying you might be waiting for even further rate declines. Some buyers are waiting until after the election.
There were 65,000 new contracts this week. That’s an uptick for the week but 4.9% fewer sales started than the same week end of July in 2023. Where in the first half of the year I reported on some slight sales increases over 2023, we’re now running behind last year.
I’ve been saying that I expect mortgage rates under 6.75% to 6.5% would start to shake some buyers free. We haven’t crossed that threshold, although rates dipped down to maybe 6.8%, but I would have expected some slight improvement in purchases, and we don’t see any. Maybe there’s some inverse psychology happening where, if rates are rising, you want to get in before they go up more. But, if you see rates falling, you want to wait until they fall more.
Home prices unchanged
The median price of the homes on the market is $450,000 again this week. By this measure, home prices are unchanged from last week and from last year. In fact home prices are unchanged across the country for two full years. In fact, we discussed this two years ago as a possibility. These asking prices will start ticking down in August.
The median price of the new listings is $419,000 — that’s the cohort of homes newly on the market this week. It’s showing reasonable resilience in pricing. Home prices have “downside stickiness” which means that sellers are very slow to want to accept lower prices even when demand falls.
The median price of the homes going into contract this week is $395,000. That’s still averaging about 3% or 3.5% more expensive than last year. I expect this number to compress under 3% before the end of the year.
Price reduction weekly pace slows
Finally, we turn to the leading indicators for future sales prices, the price cuts. Perhaps the most notable trend in the price reductions data is that the weekly pace has slowed. Some 39% of the homes on the market have taken a price cut. That’s a fairly hefty number. Obviously, demand is weak, so fewer sellers get the offer and more of them take price cuts. This week is 30 basis points more than a week ago. So that’s up a little, not accelerating. During this period in 2022, price cuts were accelerating by 150 basis points each week vs. 30 basis points now.
Mortgage rates stayed higher for longer than anyone anticipated this year. Maybe we’ve finally turned the corner? If we’re lucky? For buyers and sellers, these conditions can change fast.
Mike Simonsen is founder of Altos Research.
