Inventory is decreasing in key markets

Unsold inventory in the country’s two largest housing markets, Texas and Florida, fell this week. There are fewer homes for sale now than there were a week ago. Stocks appear to have reached the peak of the season and are slowly declining.

There appear to be two reasons why we are now seeing a seasonal spike in unsold inventory, while inventory in these states only peaked in late November last year.

First, mortgage rates are falling, while they rose last year. We may finally be on the other side of that slope, creating better dynamics for potential homebuyers. There is no sudden increase, but perhaps only a small strengthening of demand.

The number of admissions is also increasing. We now see 30,000 to 35,000 admissions every week, compared to 25,000 last year. This likely reflects sellers’ discouragement in a low-demand market, forcing their listings to wait until next year. It also reflects that most homeowners in the country have cheap financing, so they can afford not to sell in adverse conditions.

These two trends ensure that inventory remains limited for the rest of the year, especially compared to last year.

Let’s take a look at the details of the US real estate market as of mid-August 2024.

The stock shows a slight increase

There are now 704,000 unsold single-family homes on the market. That is a slight increase compared to last week. Inventory growth slows as mortgage rates fall.

While inventory has likely peaked in Florida and Texas, that’s not the case for the number of unsold homes across the country. What we are seeing may be a rebalancing of the trends.

Seller volume drops

Looking at new seller volume this week, we see only 65,000 new listings unsold plus another 12,000 immediate sales. That’s still about 9% more sellers than last year. There are far fewer vendors than normal in August. It’s about 4% fewer sellers than a week ago. This seller volume has been declining for the rest of the year. Every week fewer and fewer sellers on an already low number.

A tick down while waiting for the house sale

On the purchasing side, 65,000 new single-family contracts were pending. That is only a decrease compared to last week and is a few percent higher than this time last year. It’s encouraging that at this time there are a few more sales each week than last year, but there’s no real sign of growth yet. Will we finally see relative sales gains in the fourth quarter? We keep watching.

There are a total of 368,000 single-family homes with sales currently pending. That is 2% more than last year, but basically unchanged. We are still at the 4 million annual pace for home sales. It will be difficult to gauge a relative improvement in home sales in the fourth quarter.

The bottom line for the home sales rate is that it may be slightly higher at this point than last year and the easier annual comparison will begin later in September.

House prices are falling

The average price of single-family homes in the US is falling now and for the rest of the year. The average price of all homes on the market is now $449,000, which is just a fraction of a percent lower than last week. This is currently unchanged compared to last year. We are past the seasonal peak in prices. What we’re looking for is whether sellers are offering more aggressive discounts this fall than last year. Or do they just not give a discount and just withdraw the listing to try again later?

The price of the newly listed homes this week is $399,998, just a hair under $400,000. The price for new offers is also barely higher than last year. Those gains have been compressed.

The price of the homes under contract this week is $385,000. That’s down 2.5% from last week and hovering about 4% higher than a year ago.

Price reductions are decreasing

Approximately 39.9% of homes on the market have seen a price reduction from their original list price. If inventory starts to decline over the next two months, the percentage of homes on the market with price reductions will also decline. There is a natural seasonal curve here. Takes increase in the fourth quarter – anyone who didn’t get an offer pulls the ad during the holidays. We are close to the seasonal peak in price reductions. Unless we get a spike in mortgage rates, like the last two Septembers.

Demand will decrease with the season, but will not worsen the season like the last two years. If you are a seller in this market, hopefully you are charging a price to move the property and not too much to start with. For much of the year we have had a divided country, with some markets outbidding and getting immediate sales, but other parts being very slow. I mentioned Texas earlier. Texas may have reached inventory for the year. The Austin, Texas market peaked in inventory a few weeks ago. Austin now leads the nation in price reductions, taking over the top spot from Sarasota, Florida. I will keep an eye on these markets to see if the price cuts have also peaked.

The big trends from earlier this year are now shifting. For buyers and sellers, these circumstances can change quickly and this can have a major impact on smart decision-making. They need to hear the data from you so they know how to act.

Mike Simonsen is the founder of Alto’s research.