The housing stock fell last week. Have sellers quit?

Since mid-2022, when mortgage rates rose, two facts have become clear: new listing data has risen to its lowest level on record, and inventory has been able to grow from record lows thanks to mortgage rates remaining high. We have seen some growth in the number of new homes this year compared to 2023 levels, which is good for housing. However, the recent spike in mortgage rates means some sellers may simply call it quits. Let’s see what last week’s data tells us.

New advertising data

One place to see if home sellers are dropping out is our new listing data, which clearly shows if home sellers are reluctant to list their homes. So far I haven’t seen anything that makes me believe this is the case, including last week when we saw only a slight dip in new listings data.

While I didn’t get my weekly forecast of at least 80,000 for new ad data during the peak seasonal months this year, the fact that we’ve seen some growth is positive for 2024. So far I haven’t seen anything that shows this is higher. Mortgage rates have had a negative impact on new listings. I hope this data line’s seasonal decline remains consistent with slight year-over-year growth.

Here are last week’s new offers from past years:

• 2024: 60,158
• 2023: 56,634
• 2022: 56,522

Weekly home inventory data

If we were to see a wave of sellers quitting, active listing data would also be affected. While we saw a slight decline last week, I wouldn’t say it’s due to higher mortgage rates.

This year, for a short period of time, I got my dream home inventory dateline, with rising inventory tied to my 11,000-17,000 homes per week model with lower mortgage rates and positive, forward-looking demand. That has changed recently; inventory growth has slowed and turned negative last week. As we have seen in recent years, we are getting closer to a seasonal decline in the number of active listings, so the week-to-week decline is not a major problem.

We do have data on sellers withdrawing their offer; that’s one way to see if market sellers are just giving up. However, the slight week-to-week decline doesn’t mean much for active listings considering it’s almost Halloween. As you can see, we have made progress in inventory growth year after year.

• Weekly Inventory Change (October 18 – October 25): Inventory decreased from 739,434 Unpleasant 737,997
• Same week last year (October 20 – October 27): Stock rose from 554,350 Unpleasant 562,556
• The lowest inventory level of all time was in 2022 at 240,497
• The annual inventory peak for 2024 to date is 739,434
• For some context, the number of active mentions for this week in 2015 was 1,168,936

Price reduction percentage

In an average year, a third of all homes are reduced in price; this is the standard home activity. Rising mortgage rates last year and this year have led to a growing number of price reductions. Given the reality of rising interest rates and rising inventories, markdown rates should be higher than in times when interest rates were lower and demand for mortgages increased.

A few months ago I said on the HousingWire Daily podcast that price growth rates would cool off in the second half of the year. Now I’m 100% surprised that prices have remained as stable as in our weekly data, so my prediction of 2.33% national house price growth is in danger of being too low.

Here are last week’s price reduction percentages compared to recent years:

• 2024: 39.5%
• 2023: 39%
• 2022: 43%

10-year interest rate and mortgage interest rate

My prediction for 2024 included:

• A mortgage interest rate range between 7.25%-5.75%
• A bandwidth for the ten-year interest rate between 4.25% and 3.21%

We’ve had a lot of confused consumers, mortgage lenders and real estate agents over the past five weeks. I understand the shock of seeing mortgage rates rising as quickly as before. CNBC asked me that recently talk about this. If you want a deeper explanation of why mortgage rates have risen since the Fed cut rates, I covered this topic in a recent HousingWire Daily podcast. A jobs week is coming, which could move the bond market; What none of us want to see is the 10-year rate rising above 4.40%, which would cause mortgage rates to rise.

Mortgage spreads

The mortgage spread story was positive in 2024, while it was negative in 2023. We have already seen a big step this year; Mortgage rates would be much higher today if spreads did not improve. Unfortunately, spreads have deteriorated due to the recent spike in mortgage rates. But if I took last year’s worst spreads, mortgage rates would be 0.75% higher today. If mortgage spreads were to return to normal, mortgage rates would fall by 0.71% – 0.81%.

Weekly ongoing sales

Below you will find the Altos Research weekly ongoing contract data to reflect real-time demand. This data line is very seasonal, as we can see in the chart below, and we shouldn’t forget how high mortgage rates were this time last year. We are now showing growth on this data line versus 2023 and 2022 data, but context is critical. 2022 sales saw their fastest crash ever, and 2023 home sales were at record lows, so consider the growth in the context of these two truths.

Imagine if mortgage rates remained at 6% for twelve months; if that were the case, sales would easily grow year after year. We have many more homes in inventory this year than last year to promote sales growth when rates drop.

These are the weekly open sales for the past week over the past years:

• 2024: 356,127
• 2023: 319,464
• 2022: 339,016

Buy application data

The winning streak of purchase request data ended with higher rates and now we have back-to-back negative weeks. Last week’s decline put us close to flat year-over-year territory, even with extremely low Comps. Purchasing apps were down 5% week over week and only 3% year over year.

When mortgage rates rose earlier this year (between 6.75%-7.50%), the purchase application data looked like this:

• 14 negative prints
• 2 flat prints
• 2 positive prints

Since mortgage rates started falling in mid-June, this is what it looked like:

• 12 positive prints
• 5 negative prints
• 1 flat
• 3 consecutive positive annual growth rates

Now that mortgage rates have risen again, here we are:

• 2 negative prints
• 0 positive weekly prints

We only have back-to-back positive year-over-year data due to a low bar.

Next week: jobs, inflation, bond auctions and home prices

Are you ready for a Halloween week of data that could push bond yields higher one way or another? This is it! We have a jobs week, plus inflation data with the PCE reports, a few bond auctions and national home price reports.

Of course, labor above inflation always drives returns lower. Weaker labor data pushed yields lower from June to September, while last month’s jobs week beat expectations and sent bond yields higher. The key this week is to see how the bond market reacts to each labor report, as we have pushed the 10-year yield nearly 70 basis points higher since the morning the Fed cut rates. For the 10-year interest rate, the critical level that we do not want to exceed is 4.40%.