One of the most positive developments in the housing market in 2024 has been the increase in active housing inventory, which is now approaching levels seen in 2019. Despite those 2019 levels being at a five-decade low before COVID-19, the market was still functioning better than it did from 2020 to 2023.
For the first few years of COVID-19 recovery, there was an unhealthy imbalance with too many buyers competing for too few homes. In March 2022, for example, there were only 240,000 homes available for sale. Looking ahead to 2025, the market is in a much better position if mortgage rates fall towards 6%, a situation that wasn’t the case before.
Weekly Housing Inventory Data
On the latest episode of the HousingWire Daily podcast, I will be discussing the 2024 year in review of the housing market. A key point that stands out is the increase in inventory not leading to the significant national home-price crash that many experts had predicted for years. Instead, we are gradually returning to a more normal market and moving away from the extremely unhealthy housing inventory conditions we’ve seen.
- Weekly inventory change (Dec. 20-Dec. 27): Inventory fell from 667,466 to 650,992
- The same week last year (Dec. 22-Dec. 29): Inventory fell from 528,601 to 513,240
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 so far is 739,434
- For context, active listings for this week in 2015 were 994,396
New Listings
The new listing data for 2024 paints a positive picture, even though it fell short of the anticipated target of a seasonal weekly peak of at least 80,000. The peak new listings came in just over 75,000 weekly. In a standard market year, for example, between 2013 to 2019, peak monthly new listings ranged between 80,000 and 110,000. However, this has not been the case in the past two years.
While we were hoping for numbers closer to normal this year, we did observe growth, which is encouraging. For context, new listing data ranged between 250,000 and 400,000 per week during the housing crash bubble years.
New listings data for last week over the past few years:
- 2024: 32,462
- 2023: 24,462
- 2022: 19,128
Price-Cut Percentage
In an average year, about one-third of all homes see a price cut, reflecting the usual dynamics of the housing market. Rising mortgage rates often lead to an increase in the percentage of homes reducing their prices. Conversely, when mortgage rates drop, we typically see a rise in demand, which can stabilize or even boost home prices, as we’ve recently seen with falling rates.
My original forecast for home-price growth in 2024 was 2.33%, but recent data suggests it might be too low. Initially, I expected a seasonal decline in prices during the second half of the year, but emerging trends show that home prices held up better than anticipated.
Here are last week’s price-cut percentages compared to previous years:
- 2024: 36.4%
- 2023: 35%
- 2022: 38%
Weekly Pending Sales
The latest weekly pending contract data from Altos Research provides valuable insights into real-time trends in housing demand. Over the last 10 weeks of the year, there has been an increase in year-over-year pending contracts compared to 2022 and 2023 despite rising mortgage rates.
While it’s evident that changes from the lowest sales levels on record don’t require much effort to notice, it suggests that a firmer bottom has been established. However, sales data slowed down last week compared to recent trends, something to monitor, especially if mortgage rates continue to rise in 2025. Additionally, if mortgage rates fall again, we could have more housing inventory than in recent years.
Weekly pending contracts last week over the past several years:
- 2024: 269,337
- 2023: 258,368
- 2022: 251,722
Purchase Applications
Purchase application data was not released during the holiday week but will resume next week. In the last 10 weeks of the year, there were six positive weeks compared to four negative weeks despite rising mortgage rates. This trend reflects the seasonal demand typically seen during this period over the past few years, with a deviation this year due to rising rates.
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%
The 10-year yield remained relatively stable last week, resulting in minimal movement in mortgage rates. Favorable mortgage spreads contributed positively to rates, especially considering the 10-year yield is near yearly highs. Earlier this year, when the 10-year yield was similarly high, mortgage rates were 40 to 50 basis points higher.
Mortgage Spreads
Another success story for the housing market in 2024 has been the significant improvement in mortgage spreads. What was a challenge last year has become a positive variable this year. Without this positive shift in mortgage spreads, discussions about the housing market today would look very different, especially given recent events with the 10-year.
Mortgage rates would be near 8% if we were experiencing the peak negative spreads of 2023. Applying the worst levels of spreads in 2023 to today would result in an additional 0.84% on the mortgage rate. Conversely, if mortgage spreads were at normal levels, we could expect mortgage rates to be approximately 0.69% to 0.79% lower today.
The Week Ahead: Pending Home Sales and Home Prices
I will be on Yahoo Finance on Monday morning to discuss the results of pending home sales. We also have home-price data scheduled for this week, along with a few ISM manufacturing reports and bond auctions.
We will closely monitor jobless claims data each week, as labor is more important than inflation. Last week’s jobless claims fell by 1,000 to 219,000, the lowest level in a month. The four-week moving average rose by 1,000 to 226,500. The key level for me since 2022 has been 323,000 on the four-week average: if we are truly going into a recession, that is the target level the data would reach.
It will be a light trading week due to the holidays, but keep an eye out for the podcast on Dec. 31, where I recap the HousingWire 2025 Housing Market Forecast and talk further about inventory.
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