Housing stock drops noticeably during election week
The seasonal peaks and troughs in the housing stock have occurred later than usual in recent years. Last week we saw a noticeable drop in both active inventory and new listings, which isn’t abnormal, but there may have been an election variable here. Over the past two years, starting in mid-November, mortgage rates have fallen and we have seen positive, forward-looking data on housing demand. Will that be the case again?
Weekly home inventory data
After seeing the spike in inventory, the best housing story in 2024 is that we have enough inventory growth to meet demand if mortgage rates fall to 6% or lower. Furthermore, my model of healthy, normal inventory growth – between 11,000 and 17,000 per week – has remained consistent this year, as we have not seen one print above 17,000 in 2024, but a few prints between 11,000 and 17,000, which is something we could do. didn’t do it at all last year.
- Weekly Inventory Change (November 1 – November 8): Inventory has decreased from 735,718 Unpleasant 721,576
- Same week last year (November 3 – November 10): Stock rose from 566,882 Unpleasant 566,941
- The lowest inventory level of all time was in 2022 240,497
- The inventory peak for 2024 so far is 739,434
- For some context, the number of active mentions for this week in 2015 was 1,140,557
New advertising data
Another positive story for 2024 is the growth of new listings data. Yes, we didn’t reach my target level this year – we missed 5,000 – but growth is growth. Remember all those years of stories from bogus housing experts that we would see a flood of new housing due to the Silver Tsunami, Airbnb bankruptcies and stressed home sellers? 2024 will be the second lowest year for new listings ever. And last week we had the lowest new listing data in history.
New listings data can be very volatile from week to week, and last week was a big plunge. Perhaps some people have decided to wait to put their homes on the market until after the election. However, it’s almost Thanksgiving and a seasonal stock drop is common at this point. Here’s last week’s new ad data from past years:
- 2024: 48,863
- 2023: 55,327
- 2022: 52,643
Price reduction percentage
In an average year, a third of all homes are reduced in price; this is the standard home activity. When mortgage rates rise, the price reduction percentage grows. When rates fall and demand picks up, this data line can cool off, as has been the case recently.
A few months ago I predicted on the HousingWire Daily podcast that price growth rates would cool off in the second half of the year. I may have been wrong on this assessment, but our upcoming new price index finally saw a seasonal decline last week.
I was 100% surprised that prices remained as firm as in our weekly data with our inventory levels. The price reduction percentage fell earlier in 2024 than in the two previous years; The lower mortgage interest rate did its job. As you can see, though, with more inventory in 2024, it’s a more modest move.
Here are last week’s price reduction percentages compared to recent years:
- 2024: 38.8%
- 2023: 39%
- 2022: 43%
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Buy application data
Higher mortgage rates always impact purchase application data, so the fact that the last four weeks have seen a negative trend is not surprising. It takes about 30 to 90 days for purchasing application data to reach sales data, so it would be about now that we see the hit.
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
When 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:
- 3 negative prints
- 1 positive weekly printing
- Four consecutive weeks of positive year-on-year data, but the bar for this is low.
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 the fastest sales decline ever, and 2023 home sales were at record lows, so consider the growth in the context of these two truths.
Higher mortgage interest rates impact weekly data on current contracts. I was surprised by the steady demand last week, but we may see a slowdown in new listings data here. Perhaps there was an election delay last week; if that’s the case, we’ll see a small comeback in inventory next week.
These are the weekly open sales for the past week over the past years:
- 2024: 336,624
- 2023: 301,768
- 2022: 314,271
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%
The most important thing about the past week is that the 4.40% level on the 10-year interest rate was maintained. It’s been a wild, crazy week with the election and the Fed meeting. However, the 5% downward trend is still intact for the time being.
Things calmed down after the election, and even more so after the Fed meeting, ending the week at 4.31% .
It is claimed that newly elected President Trump’s economic policies will produce mortgage rates of 8% plus. I encourage everyone to listen this HousingWire Daily podcast that we recorded after the election to try to bring some reality to the mortgage rate discussion that will take place over the next four years.
Mortgage spreads
The mortgage spread story was positive in 2024, while it was negative in 2023. We have already seen a big movement 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 were to take last year’s worst spreads, mortgage rates would be 0.65% higher today. If mortgage spreads were to return to normal, mortgage rates would fall by 0.78% – 0.88%.
The coming week. Inflation week, retail sales and Fed speeches
It’s inflation week again! We’ll also have retail sales and a few Fed presidents giving their views on the economy. After all the drama last week, I want to see how the bond market reacts to inflation numbers and retail sales now that bond yields are much higher than the day the Fed cut rates in September.
Also, we always want to look at the Fed president’s speeches and their terminology for clues about the future. Again, as always, it’s labor over inflation. Keep an eye on unemployment claims data every Thursday; that is their extended labor data line and the one the bond market will follow.
