Has the demand for houses in the spring already started?

5 days ago

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Has the demand for houses in the spring already started?

Has the spring home buying season already started? Our weekly current contract data has been showing year-over-year growth for some time, even at high mortgage rates. I believe spring demand actually started in November of this year – a trend that is clearly visible in the rising sales data we have seen during the winter months in recent years.

However, we should keep in mind that existing home sales data is based on record sales levels, so it won’t take much to move the needle. I discussed further Yahoo Finance recently.

Weekly ongoing sales

The latest weekly current contract data from Alto’s research provides critical insights into real-time trends in housing demand. The economy has been showing positive growth against 2022 and 2023 data for some time, and, in the first few days of 2025, also against 2024 data. We are seeing a slight increase in demand year on year with one digit.

It’s a shame that mortgage rates have risen 1% since September, because the sale of existing homes could cost around 4.5 million monthly. In late 2022 and 2023, when rates fell by more than 1%, we saw an increase in demand of approximately 500,000. Now pending home sales have been up for four months in a row, so over time we’ll start to lose the super low bar we’ve been working with. However, it was nice to see demand picking up in the last months of 2024.

Weekly current contracts last week over the past years:

2025: 260,329
2024: 247,652
2023: 231,127

Buy application data

My rule of thumb: I don’t track purchase request data during the last two weeks of the year because very few people go out to fill out requests during Christmas and New Year’s week. Additionally, both Christmas and New Year fell in the middle of the week this year, which could throw off people’s travel plans. Before those last two weeks, we recorded six positive weekly results and four negative results with higher mortgage rates. We will start tracking purchase request data again next week, even though it was New Year’s last week.

10-year interest rate and mortgage interest rate

My prediction for 2025 included:

A mortgage interest rate range between 7.25%-5.75%
A bandwidth for the ten-year interest rate between 4.70% and 3.80%

Lately, the 10-year yield has been hovering around a key level of 4.60%, showing little meaningful movement anyway. We’re near the top of the 10-year interest rate and mortgage rate forecast for 2025. As we headed into jobs week, I wrote about the importance of labor data to mortgage rates in 2025 and highlighted which data points deserve more attention in this article.

Mortgage rates briefly hovered above my 7.25% level in 2024, but for the most part held steady for most of the year as mortgage spreads improved.

Mortgage spreads

If mortgage spreads did not improve in 2024, we would have already lost a number of construction workers due to rising interest rates. However, we can be grateful that spreads improved last year and remain favorable.

If we apply 2023’s worst spread levels to current rates, we would see an additional 0.77% increase in mortgage rates, bringing us close to 8%. Conversely, if mortgage spreads were normal, we might expect mortgage rates to be about 0.76% to 0.86% lower today.

Weekly home inventory data

We’re heading into 2025, and historically, housing inventory has tended to bottom out in March and April, at least after the COVID pandemic. In the last ten years before that, we saw the lowest inventory in late January or February, after which inventory started to rise. The stock’s lowest point last year was in February, so we’ll be watching this closely.

I don’t want the stock to bottom out in April because that would be too late in the year.

Weekly Inventory Change (December 27 – January 3): Inventory has decreased from 650,992 Unpleasant 635,432
Same week last year (December 29 – January 5): Stock fell from 513,240 Unpleasant 499,143
The lowest inventory level of all time was in 2022 240,497
The inventory peak for 2024 was 739,434
For some context, there were active listings for the same week in 2015 959,028

New entries

I’m really excited about this year’s new ad data. Last year I expected growth, and while we saw an increase, it did not reach my target levels. Still, I was happy to see growth.

It’s important to remember that most sellers are also buyers and the past two years have produced the lowest new listing data in history. This means we can look at 2025 as a year when things get back to normal, and we can expect to see some weeks where peak season new ad data is between 80,000 and 110,000.

Last week was a holiday week, so new listing data was down; everything will return to normal soon. This also explains why people should not take the last two weeks of the year with purchase request data seriously either.

New ad data from the past week from past years:

2025: 18,484
2024: 35,698
2023: 31,995

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.

We are experiencing a seasonal dip in this data line and we will keep a close eye on this for any changes in the dates, especially if rates move higher or lower.

2025: 34.9%
2024: 33%
2023: 36%

Next week: jobs week, bond auctions and Fed speeches

It will be an intensive week ahead! We have a jobs week, which includes all four jobs reports, plus bond auctions, global PMI data, the release of the Fed minutes, and speeches from some hawkish Fed presidents. Since we are at a key level in the bond market, this week could be wild. As always, we look at unemployment claims data every Thursday. Last week it fell again.