Why home prices remain stable despite higher rates

Home prices have remained steady over the past two months, even with higher mortgage rates and inventory data. Our weekly tracker data was created to look ahead of the traditional monthly reports like Case Shiller and the NAR Existing Home Sales Report, and what I’ve seen in recent weeks has shocked me.

I want to show you how the data changed when mortgage rates moved toward 6% so that the next time this happens we have a better idea of ​​what to expect in the housing market.

Anomaly in the data

My goal is to determine what level of mortgage rates we need to change the demand curve, which can also change the price curve in housing data. I have long believed that it is rare in the US after 1996 for existing home sales to be below 4 million. We’ve had a few months where we’ve fallen below this level, but nothing dramatic.

On November 9, 2022, I showed how housing dynamics were changing by tracking forward-looking data. This podcast video is a tutorial on how to track this and why people were wrong during the 2023 housing price crash because they didn’t have working models. These principles still apply today. Let’s take a look at what looks different today compared to the past two years.

Current contracts

First, we have to realize that we are working with the third calendar year of the lowest home sales on record, once you adjust that number for workforce levels. It’s also not that we have underwater mortgages or tight credit; this was the biggest crash ever and sales are still low.

This means we have a low turnover to work from, because mortgage rates have been hovering between 6% and 8% for two years with rising prices, and we are not declining in turnover from these levels. So looking at the contract data, mortgage rates have seen a solid increase towards 6% and the data continues to show a deviation from the levels we see in 2022 and 2023. This means that sales at the lower end find strong momentum. basis to work from.

What I take from this is that we need a mortgage interest rate of 6% to grow turnover with any sustainability. It won’t be spectacular, but at that level we can grow and maintain higher sales figures. We don’t need mortgage rates of 3%, 4% or even 5%, but simply moving towards 6% and staying there can work.

If you want to see sales growth with any kick, you need sub-6% mortgage rates with maturity, but since I can’t even predict those levels yet, I won’t go in that direction until the job market breaks or spreads widen . much better. I talked about this recently on CNBC. This is something to think about in the future. Every year wages rise, more households are formed and if mortgage rates fall, this should again produce a positive demand curve of more than twelve weeks. However, if mortgage rates can remain between 5.75% and 6.25% for 12 months, this could sustain a higher level of sales based on the data we’ve seen since late 2022.

Buy application data

Last week, purchase request data showed a positive print of 5% week-over-week and increased 10% year-over-year. However, remember that October had a shallow bar, so take the entire month and show positive year-over-year growth with some context. If I were to take the entire month of October, which was positive every week on a year-over-year basis, we had an average growth of about 7.4% over last year.

Let’s take a look at how this data line has performed so far this 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 print
• 3 consecutive positive annual growth rates

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

• 2 negative prints
• 1 positive weekly printout

Here we can see a clear positive, forward-looking data line with mortgage rates heading towards 6%, and this is now double since the end of 2022. This has happened as demand has been improving for over twelve weeks. I was talking about the recent data being different in the HousingWire Daily Podcast last week. But it’s not just about demand, it’s also about price.

Price details

As for the price reduction data, many fake housing experts took information from other sources and did not know how to explain it correctly. By the way, this was one of the most entertaining things to watch in 2024. They misinterpreted the price reduction rate and rising inventory data, which meant national home prices should drop significantly this year. But we’ve never had a real deep negative price curve data line this year, and it’s now November.

However, this year, mortgage rates moving towards 6% meant that price reduction rates earlier this year were lower than in 2022 and 2023 data. Nothing too dramatic here, but as you can see from the open contact details, we have a rate variable that can change the data line even as housing stock increases.

There were many years of housing data from the early to mid 1980s and mid to late 1990s, and even from 2000 to 2005, where we saw rising inventory And sale. You can have rising inventory, rising sales, and rising prices. The markdown rate data is crucial if you know how to read it properly, and as you can see below, the markdown rate data has slowed down lately.

What’s shocking is that our weekly new price median data has improved even in a seasonally soft price period, especially now with higher inventory data. As you can see below, there is a clear deviation from the data for 2022 and 2023. This is why my 2024 forecast of 2.33% and house price growth is in jeopardy. If mortgage rates stayed around 6%, you wouldn’t have to be a rocket scientist to guess what the data line shows.

Weekly data lines

I’m focusing on the anomaly data in this weekend’s tracker, which is different from what we usually do; this is a quick look at the traditional data we show.

The weekly home inventory did decline slightly. This is a consecutive week of small stock decline. We’ve seen good growth in active listings data this year, so for those who said inventory can never grow at higher rates, hopefully by 2024 you’ll have changed your mind.

The stock fell from 736,014 Unpleasant 735,718.

Data on new listings saw a slight increase this week 60,066 Unpleasant 60,819.

The positive story for 2024 so far is that the stock has grown. I wanted this to happen in 2023, but it happened too late to make any material change. However, for 2024, we have seen inventory growth and no new severe listing data from the 2024 new listing data. To give you an idea of ​​what stressed new listings look like, compare the 60,819 new ad data this week versus the data we saw this week over these years:

• 2009: 280,400
• 2010: 353,457
• 2011: 352,030

As I often say, we had different credit markets back then, so stop dancing with a ghost.

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%

I’ll keep this as simple as possible. I have been talking about this limit of 4.40% on the ten-year interest rate for a while now. If this level breaks higher, we will have broken the downward trend in the 10-year yield that started on October 16, 2023, when it was at 5%. There’s a lot happening this week, so let’s keep an eye on it. If you’re confused about the bond market action on Jobs Friday, this article discusses my take on it.

Mortgage spreads

Mortgage spreads had a good day on Friday, preventing a deterioration in prices. The bigger story, however, is that the improvement in spreads this year has been positive for the housing market. If we didn’t see an improvement this year, rates could be higher not just today but all year long. Spreads have deteriorated recently, but are still better than last year.

The week ahead: All bets are off

Between the election and this week’s Fed meetings, any expectations that everything would be normal have been dashed. I’ll be on the HousingWire Daily podcast three times this week to explain what’s happening. Monday’s podcast will try to explain what’s going on with 10-year rates and mortgage rates.

For this week, the 4.40% level for bond yields is crucial; Closing above that level and obtaining follow-on bond sales could be problematic for the housing industry. However, try to ignore the intraday movements; these can be wild near critical technical levels. Good luck to everyone this week.