Housing inventory, which saw an excellent pickup a few weeks ago, has been slowing down and last week we saw a slight decline. Has seasonality finally kicked in or did back-to-back hurricanes slow things enough to influence inventory data?
Weekly housing inventory data
Four weeks ago was the best week of inventory growth in 2024, as we hit my model range without higher mortgage rates: I gave it the chef’s kiss. Since then, inventory growth has been slowing down and even declined last week. But, the two recent hurricanes have an impact here, as nothing is happening while certain parts of the country deal with natural disasters, so keep that in mind for the last two weeks.
For example, the chart below shows how inventory in the Tampa Bay area has declined more aggressively than in other parts of the United States — this is obviously hurricane-related.
National data:
- Weekly inventory change (Oct. 4-Oct. 11): Inventory fell from 734,290 to 732,410
- The same week last year (Oct. 5-Oct. 12): Inventory rose from 537,032 to 546,450
- The all-time inventory bottom was in 2022 at 240,497
- The yearly inventory peak for 2024 so far is 734,290
- For some context, active listings for this week in 2015 were 1,178,805
New listings data
New listings data in 2024 has been a positive story for me; even though I didn’t get to hit my minimum target of 80,000 new weekly listings even in the peak seasonal weeks. Remember that 2023 had the lowest new listings data ever and 2024 will have the second lowest. Still, at least we saw growth in 2024. One of the reasons total inventory data hasn’t gotten back to 2019 levels is the lack of sellers in 2023 and 2024. Also, let’s remember that 2019 inventory levels were a four-decade low before 2020.
Here are new listings for last week over the past several years:
- 2024: 62,876
- 2023: 57,229
- 2022: 59,458
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. Rising mortgage rates last year and this year have created a growing level of price cuts, especially when inventory rises. When mortgage rates fell recently, the price-cut percentage cooled down a tad; now that mortgage rates are rising again, we will see how this impacts this data line. Seasonality will soon kick in for this data line, which traditionally falls late in the year. As you can see below in the chart when our active inventory levels was at 240,000, the price cut % was historically low, not a healthy thing.
A few months ago, on the HousingWire Daily podcast, I discussed that the price-growth data would cool down in the year’s second half. However, I am unsure if the price-growth cooling will match my 2024 forecast, which has prices rising at 2.33% for the year. It does look like I might be too low.
The price-cut percentage data is below 2022 levels and risks an earlier seasonal curve lower than 2022 and 2023. However, mortgage rates have risen recently so we will see if that changes the data in a meaningful way the last 10 weeks of the year.
Here are the price-cut percentages for last week over the previous few years:
- 2024: 39.62%
- 2023: 38%
- 2022: 42%
10-year yield and mortgage rates
My 2024 forecast included:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
I forecast channel ranges with mortgage rates and the 10-year yield because we can all follow the economic data that matters together and look for crucial inflection points with rates. This is the slow dance with the 10-year yield and 30-year mortgage rates I often discuss.
I have a crucial line in the sand around 3.80% on the 10-year yield, and for 2024, with a better mortgage spread, that equates to mortgage rates around 6.25%. For mortgage rates to go below this, stay below or head much lower, you need weaker economic data. We recently had a series of economic and labor data that beat expectations. This podcast goes into that and explains what happened on the day the Fed cut rates and after jobs Friday.
We track all data, but the key is always labor over inflation. If the jobs data came in as a big miss, we would have a different conversation today, but that didn’t happen.
Mortgage spreads
The mortgage spread story has been positive in 2024, whereas it was negative in 2023. We have seen a big move already this year; mortgage rates would have been much higher today without spreads improving. So, as rough as some people in the mortgage community feel, it could have been worse. We aren’t back to normal with the spreads, but it’s a good sign that the spreads started improving before the Fed cut rates, and over time, this has room to head lower.
Purchase application data
Mortgage rates went up again last week. While that increase didn’t have too much impact on last week’s data because the push higher happened two Fridays ago, we should see some of the impact of rising rates in the data pool next week.
Let’s take a look at what the data did when mortgage rates rose from 6.75% to 7.50% early in the year. This is what weekly purchase application data looked like with rising rates starting from the latter part of January:
- 14 negative prints
- 2 flat prints
- 2 positive prints
Even though the purchase application data didn’t show much downside on volumes earlier in the year, the weekly data was very negative. Before late January, when rates started to rise, we had about eight weeks of positive trending purchase apps. Then, as has been typical lately, mortgage rates headed higher, and demand faded.
This is what weekly purchase application data looks like since mortgage rates started to fall in mid-June:
- 12 positive prints
- 5 negative prints
- 6 straight weeks of positives, and last week’s data was flat, which makes it easily the best 7-week period of the year.
- 3 straight weeks of positive year-over-year data last week came in at 8% positive year-over-year growth
For the rest of the year we will be keeping an eye on how higher rates are impacting the data. Recently it has been minimal but history says that doesn’t last, especially if rates go higher.
Weekly pending sales
Below is the Altos Research weekly pending contract data to show real-time demand. Now, this data line is very seasonal, as we can see in the chart below, and we all know that mortgage rates were heading toward 8% a year ago, so we need to be mindful of the positive year-over-year data. The weekly data firmed up when rates were heading lower, but now we need to see how this data looks with rising rates. Although it’s lost a bit of steam, there’s nothing too harmful yet in the data.
This is the weekly pending sales for last week over the last few years:
- 2024: 350,455
- 2023: 325,584
- 2022: 351,527
The week ahead: Fed speeches, retail sales and housing starts
We will have several Fed presidents talking this week, including Kashkari and Waller; watch out for that. We also have bond auctions and retail sales this week. The housing data will be interesting — purchase apps data should show some sting from rates rising. The builder’s confidence won’t show that sting yet, but we will be able to see their mindset with rates near 6%. Finally, with some bond auctions in the mix, we will have housing starts on Friday — the data line that beat expectations last month and started to send the 10-year yield higher.
