Rising inventory is the most positive story in the housing market in 2024
The most positive development on the housing market in 2024 is the increase in the active housing stock, which approaches the 2019 level. While these 2019 levels represent the lowest level in five decades before COVID-19, the market still performed better than it did from 2020 to 2023.
The early years of the COVID-19 recovery saw an unhealthy imbalance, with too many buyers competing for too few homes. For example, in March 2022 there were only 240,000 homes for sale. Now looking ahead to 2025, the market is in a much better position if mortgage rates fall to 6%, which was not the case before.
Weekly home inventory data
On Monday’s episode of the HousingWire Daily podcast, I discuss the 2024 Annual Housing Market Review. I want to emphasize an important point that I have found interesting: the increase in inventories has not led to the significant national housing price crash that many so-called housing experts have already predicted. predict years. Instead, we are gradually returning to a more normal market and moving away from the barbarically unhealthy state of housing stock that we have been seeing.
- Weekly Inventory Change (December 20 – December 27): Inventory decreased from 667,466 Unpleasant 650,992
- Same week last year (December 22 – December 29): Stock fell from 528,601 Unpleasant 513,240
- 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 active listings for this week in 2015 were 994,396
New entries
The new 2024 ad data tells a positive story, even if it fell short of my expected target of a seasonal weekly peak of at least 80,000. The peak of new listings was just over 75,000 weekly. When we have a standard market year, for example between 2013 and 2019, peak monthly new listings reached between 80,000 and 110,000. However, this has not been the case over the past two years.
I had hoped that the numbers would be closer to normal this year, but while that didn’t happen, we did see some growth, which is encouraging. For context, remember that new listing data during the housing crisis years ranged between 250,000 and 400,000 per week.
New ad data from the past week from past years:
- 2024: 32,462
- 2023: 24,462
- 2022: 19,128
Price reduction percentage
In an average year, it is common for around a third of all homes to see a price drop, reflecting the usual dynamics of the housing market. Rising mortgage rates often lead to an increase in the percentage of homes, causing their prices to fall. On the other hand, when mortgage rates fall, we typically see an increase in demand, which often causes home prices to stabilize or even rise, as we have recently experienced with falling interest rates.
My original forecast for house price growth in 2024 was 2.33%, but recent data suggests it may be too low. Initially, I anticipated the usual seasonal decline in prices in the second half of the year, but emerging trends show that house prices have held up better than I thought.
Here are last week’s price reduction percentages compared to previous years. Let’s see how this fits in with current market sentiment:
- 2024: 36.4%
- 2023: 35%
- 2022: 38%
Weekly ongoing sales
The latest weekly current contract data from Alto’s research provides valuable insights into real-time trends in housing demand. During the last ten weeks of the year, the number of current contracts increased year-on-year compared to 2022 and 2023, despite rising mortgage rates.
While it wouldn’t take much to see changes from all-time low sales levels, this suggests a firmer bottom has been reached. However, I noticed that sales data slowed last week compared to recent trends. This is something to keep an eye on, especially if mortgage rates continue to rise in 2025. And when mortgage rates fall again, we will have more housing than at any time in the past few years.
Weekly current contracts last week over the past years:
- 2024: 269,337
- 2023: 258,368
- 2022: 251,722
Buy applications
Purchase request data was not released during the holiday week but will resume next week. In the last ten weeks of the year there were six positive weeks, compared to four negative weeks, despite rising mortgage rates. This trend reflects the seasonal demand we typically see during this time in recent years. This year looked strange because rates increased, while rates decreased in the two previous years.
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 10-year interest rate remained relatively stable last week, resulting in little movement in mortgage rates. Favorable mortgage spreads contributed positively to yields, especially given that 10-year yields are near annual highs. Earlier this year, when ten-year rates were at similar levels, mortgage rates were 40 to 50 basis points higher.
Mortgage spreads
Another success story for the housing market in 2024 is the significant improvement in mortgage spreads. What was a challenge last year has become a positive variable this year. Without this positive shift in mortgage spreads, our discussions about the housing market today would look very different – especially given the recent events we have experienced over the past decade.
Mortgage rates would be close to 8% if we see the peak of negative spreads in 2023. If we apply the worst levels of 2023 spreads to today, we would see an additional 0.84% on mortgage rates. On the other hand, if mortgage spreads were at normal levels, we could expect mortgage rates to be about 0.69% to 0.79% lower today.
The coming week: pending house sales and house prices
I will be there Yahoo Finance on Monday morning to discuss the results of current home sales. We also have house price data scheduled for this week, along with some ISM production reports and bond auctions.
We will keep a close eye on the unemployment benefits data each week because labor is more important than inflation. Last week’s jobless claims fell by 1,000 to 219,000, the lowest level in a month. The four-week moving average rose by 1,000 to 226,500. The key level for me since 2022 is 323,000 over a four-week period: if we really enter a recession, that’s the target level the data would reach.
It will be a light trading week due to the holidays, but stay tuned for the podcast on December 31st where I recap the HousingWire 2025 housing market forecast and talk more about inventory.
