More and more home sellers are withdrawing their offers
While the inventory of unsold homes in the housing market has continued to rise in September and October over the past two years due to spikes in mortgage rates, we are now seeing a more normal seasonal pattern, with inventory beginning to decline. We’re also seeing more home sellers withdrawing their offers to try again next year. In fact, for every two sales, another listing is taken off the market.
Let’s take a look at how these dynamics will impact home sales, prices and buyer opportunities for the rest of the year and the first quarter.
Here you will find the latest housing market data.
Stock is flat
We have now had two weeks of only a small drop in unsold inventory. The stock is not rising, but is actually flat. It is possible that the stock will recover somewhat next week. In fact, the inventory forecasting model we use, which is based on market behavior in recent years, expects an increase of just under 1% in the number of unsold homes next week. That would be normal for this time of year. However, in this environment of falling interest rates, we could see a continued decline in inventories.
There are just under 704,000 single-family homes unsold on the market in the US. That has been virtually unchanged for two weeks now. There are now 38% more homes than a year ago.
New offers at the height of the year
There are two reasons why the stock is probably around its peak for the year. We can see that the rate for new listings is still limited. There just aren’t that many people looking to sell their homes in this area.
Another reason is the recordings. For every two homes that go into contract each week, a third is withdrawn due to lack of supply. Sellers may try the market, find no takers and then decide not to sell. The longer this delay lasts, the more potential sellers accumulate. Therefore, we should expect the stock to gradually return to normal levels over the next two years. If mortgage rates fall substantially, the supply dries up.
There were 62,000 new single-family homes unsold this week. With another 12,000 new listings for which a contract already exists. This was just over a year ago, but there are still significantly fewer sellers per week than in the pre-pandemic era.
Pending home sales keep inventory in check
For each of the new contracts that are being processed, a third home will be taken off the market. There were 62,000 new contracts started this week for single-family homes, and about 30,000 more admissions. Both phenomena work at the margin to keep inventory under control.
We are on track to sell approximately 4 million existing homes by 2024. If you follow the MBA purchase mortgage applications index, it also bottomed last year at the end of September.
House prices are seeing their annual increase slow
Even now that the supply of housing on the market is no longer growing, the prices people pay for housing are falling. House prices are not falling, but the annual increase appears to be decreasing slightly.
The average price of new home sales this week is $380,000. That is a lot lower than last week and barely higher than the same week a year ago.
The price cuts have reached their peak
The price cuts appear to have reached their peak, partly due to the increasing number of withdrawals from the market. I expect an increase in price cuts in the fourth quarter before the holidays, but nothing comparable to the last two years. At that time, rising mortgage rates surprised sellers, slowed the market and caused price cuts to accelerate. We now have the opposite circumstances.
The big trends from earlier this year are now shifting. When buyers finally start moving, we will quickly see it in the data. Maybe mortgage rates have finally turned around? For buyers and sellers, these circumstances can change quickly and this can have a major impact on smart decision-making.
Mike Simonsen is the founder of Altos Research.
