The winter holiday season has arrived, and despite a recent increase in mortgage rates, the housing market continues to show resilience. While higher rates typically lead to a decrease in housing activity, the seasonal boost is helping maintain strong demand for home purchases. Additionally, pending contracts still show double-digit year-over-year growth. Let’s dive into this week’s Tracker data to see if this trend can sustain through the end of 2024.
Weekly pending sales
The weekly pending contract data from Altos Research provides valuable insight into real-time housing demand. Despite the seasonal decline in housing volume at this time of year, the recent uptick in mortgage rates hasn’t significantly impacted pending contract data, which continues to show positive year-over-year growth compared to previous years.
It’s worth noting that we are starting from historically low levels, so these positive trends should be viewed with cautious optimism. The stability in pending sales indicates a solid foundation, as discussed in a recent HousingWire Daily podcast.
Here is the weekly pending sales data for last week compared to previous years:
- 2024: 304,034
- 2023: 275,022
- 2022: 277,102
Purchase application data
The weekly purchase application data showed a 4% decline on a week-to-week basis. While the unadjusted data indicated a 30% gain, this figure is typically disregarded. However, on a year-over-year basis, the data remains positive with a 4% increase. Purchase applications serve as an indicator of future housing demand, typically 30-90 days before sales data reflects the impact.
Compared to the extremely low comparisons from October and early November, the current data shows a more consistent year-over-year growth trend. Despite the recent rise in mortgage rates, the overall growth in purchase applications remains steady.
10-year yield and mortgage rates
My 2024 forecast included projected ranges for both mortgage rates and the 10-year yield. The 10-year yield saw a significant increase last week, rising in anticipation of the upcoming Federal Reserve meeting. Despite the rise in mortgage rates, the increase has not been as sharp as expected, with mortgage spreads improving. Historically, when the 10-year yield falls, housing demand tends to improve, leading to lower mortgage rates.
Mortgage spreads
The positive impact of favorable mortgage spreads on the housing market and the economy cannot be overstated. Despite the recent increase in the 10-year yield, mortgage rates have remained stable due to these improved spreads. Comparatively, if spreads had remained unfavorable as in previous years, we would likely see a decline in housing activity and construction jobs.
Even with the rise in rates, this year’s performance has been notably better than previous years, thanks to more favorable spreads. The data indicates that mortgage rates could have been significantly higher if not for these improved spreads.
Jobless claims
For the first time, we are including jobless claims data in the weekly tracker, as it plays a crucial role in the housing market. A potential increase in jobless claims could impact rates and housing demand. The recent spike in jobless claims may be attributed to holiday disruptions, but it’s essential to monitor these numbers closely.
Weekly housing inventory data
While there is a seasonal decline in housing inventory, the positive trend in 2024 is the steady growth in inventory levels. This buffer in inventory is reassuring, especially considering the challenges faced in previous years. The current inventory growth is a promising sign for the housing market in 2024.
- Weekly inventory change (Dec. 6-Dec. 13): Inventory fell from 690,015 to 682,150
- The same week last year (Dec. 7-Dec. 14): Inventory fell from 546,424 to 538,767
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 so far is 739,434
- Active listings in the same week in 2015 were 1,050,780
New Listings
New listing data from last week showed the typical seasonal decline, but also a Thanksgiving bounce-back that is a recurring trend. Despite falling short of target levels, the growth in new listings is a positive development for the housing market in 2024. This contrasts with the negative trend observed in 2023 when new listings hit record lows.
Here is the new listings data for last week compared to previous years:
- 2024: 45,284
- 2023: 39,613
- 2022: 34,973
Price-cut percentage
In an average year, around one-third of all homes experience price cuts, a common occurrence in the housing market. When mortgage rates rise, the percentage of homes reducing prices tends to increase. Conversely, this trend reverses when rates drop and demand rises, as seen recently with falling rates.
Although I anticipated some softness in price growth in the second half of 2024, our data indicates otherwise. The forecasted price growth may be underestimated, as the year has shown more resilience than expected. The impact of improved housing demand as rates approach 6% is reflected in the price-cut percentage data.
Here are the price-cut percentages for last week compared to previous years:
- 2024: 38.1%
- 2023: 38%
- 2022: 41%
The week ahead: It’s Fed week, with tons of other reports too
The upcoming week will be eventful, with the focus on the Federal Reserve meeting and key economic reports. The Fed’s language and decisions this week will have significant implications for the market. While a rate cut is expected, the Fed’s outlook for 2025 will depend on economic data.
Other reports to watch out for next week include Global PMI reports, bond auctions, builder survey index, housing starts, existing home sales, retail sales, and more. The recent movement in the 10-year yield adds to the anticipation of how the market will react to the Fed’s announcements and economic data releases.
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