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housing stock
Currently, 526,000 single-family homes remain unsold on the market. That was a 2.6% increase compared to the previous week, when the data included the Easter holiday. This isn’t such an unusual increase since it’s a holiday week, but the 2.6% increase in unsold inventory in one week is quite noteworthy. This is undoubtedly an effect of high and rising mortgage rates. I have been sharing this view for two full years. When mortgage rates rise, inventory increases. In other words, demand slows and inventories increase. Therefore, rates are going up and inventory is definitely increasing.
The inventory of unsold homes on the market is currently up 30% from last year and 102% compared to mid-April 2022. There are 120,000 more homes on the market now than last year. There are now 250,000 more homes on the market than there were two years ago. Much of this inventory growth is concentrated in a few key markets.
Two years ago, interest rates were clearly rising for the first time in years, and inventories were rising. Inventories were coming off record lows caused by the pandemic, but were already growing 2% to 3% per week as demand slowed.
Because sales price measurements significantly lag changes in supply and demand, such year-over-year increases in inventory can lead to future home price declines. Inventory is currently up 30% year-over-year, so we’ll be watching for further signs of home price declines as the year progresses.
It’s important to note that the data shows no signs of a major home price crash. Inventory increased rapidly in early 2022, and home prices declined in the fourth quarter of the year. However, house prices recovered very quickly in 2023. If mortgage interest rates finally stabilize to some extent, we can expect housing prices to stabilize as well. In a world where mortgage rates continue to rise, the imbalance between supply and demand continues, increasing the likelihood of price corrections.
New listing
The increase in inventory is due to a combination of a decline in buyers due to worsening affordability and a gradual increase in seller volumes. Last week, he had 66,000 unsold new listings, plus 20,000 instant sales, for a total of 86,000 new listings. This means that the number of new listings last week increased by 32% compared to the same week last year.
Last year’s measurements include last year’s Easter holiday weekend, so some of this 32% comes from that quick comparison. However, the number of sellers each week in 2024 is currently on average 13% higher than last year. So as mortgage rates settle into higher levels for an extended period of time, growth for sellers is clear.
This concept is counterintuitive. Many of our listeners are familiar with the concept of mortgage rate lock-in. This was the topic of last week’s Top of Minds podcast interview with Jonah Coste. FHFA The paper on lock-in effects is discussed.
The premise of lock-in is that when interest rates rise, it becomes more expensive for homeowners to move, so when interest rates rise, lock-in increases and there are fewer sellers. But that is proving to be only partially true. The lock-in effect maintains a relatively small number of sellers. He had 80,000 sales per week, up from 100,000 per week in previous healthy years, and now, despite rising mortgage rates, weekly sales are higher than last year.
In fact, there were 66,000 new listings last week, more than any other week in 2023, and we still have a few spring months to go before that number picks up.
new pending
Meanwhile, the number of new pending cases last week was 69,000. These are homes that have been listed, received offers, and started the contract process. Most of these deals are completed in his May, as deals take an average of just under 40 days to complete.
The 69,000 contracts were 10% higher than a year ago and 7% higher than the previous week, which included the Easter holiday. So, like the inventory numbers, last week’s big jump was mainly due to the holiday rebound. However, it is really encouraging that weekly sales continue to exceed last year’s numbers.
If interest rates eventually fall, this transaction rate will accelerate and inventories will decline. However, interest rates do not appear to be on the decline. This weekly new pending data is a very useful measure of interest rate sensitivity.
Currently, 371,000 single-family homes are under contract. This is currently only a 4% increase over last year. In many parts of the country, sales are still lower than last year. The market is trying to grow, but new increases in mortgage rates aren’t helping. Currently, the mortgage index remains at record lows as more cash sales are occurring. If we’re lucky and interest rates don’t continue to rise, home sales will continue to trend slightly faster than last year. The more stable interest rates you have, the more sales you can generate.
housing prices
The median price of homes that received offers last week was $389,900. This actually puts him 1% below 2022. In 2022, home prices continued to maintain their pandemic momentum well into the second quarter. The median price of all homes under contract is $399,000, meaning homes sold in April and May will be priced 5% higher than in 2023.
The median price in the active market last week was $447,527. It rose for the week and was 1.7% higher than the same period last year. The asking price is a leading indicator of what future selling prices will be. And the growth in these leading indicators hasn’t been very strong, only barely surpassing last year at this point.
The price of the newly listed cohort did quite well in the post-Easter week at $435,000, setting a new all-time high for the index. Therefore, not all price indicators are bearish. It’s a good thing we keep an eye on.
price reduction
Meanwhile, 32.1% of homes on the market have had their prices reduced. This was an increase of 10 basis points compared to the previous week. If this recent move in mortgage rates is weighing on homebuyers, you’ll see the discount numbers jump in next Monday’s video.
Some homes that went on the market last week and were expected to receive offers did not receive any offers due to the recent rise in mortgage rates. If no offers are received, several companies will lower their asking prices on Monday or Tuesday to stimulate demand.
Two takeaways from the price reduction data: One, it will be interesting to see how many properties reduce in price next week as a result of the new increase in mortgage rates. We saw that moment in September 2022 when price cuts spiked, and again last September when interest rates spiked. Will next Monday’s data confirm that again?
And two, we should take this as a slightly bearish signal for home prices for the rest of the year, as the discount is currently a little high and rising. Although volumes are increasing, prices do not seem to be increasing given these unaffordable levels.
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