While inventory of unsold homes in the housing market in each of the last two years headed higher during September and October due to mortgage rate spikes, we’re seeing a more normal seasonal pattern now with inventory beginning to decline. We’re also seeing more home sellers withdrawing their listings to try again next year. In fact, for every two sales, there is another listing withdrawn from the market.
Let’s look at how these dynamics will impact home sales, prices, and buyer opportunities for the rest of the year and into the first quarter.
Here’s all the latest housing market data.
Inventory is flat
We’ve now had two weeks of just a little decline in the unsold inventory count. Inventory is not climbing, it’s basically flat. It may be that inventory will rebound a bit next week. In fact, the inventory forecast model we use, which is based on recent years’ market behavior, expects an increase of just under 1% of unsold homes by next week. That would be normal for this time of year. However, in this falling interest rate environment, we could see a continued decline in inventory.
There are just under 704,000 single-family homes unsold on the market across the U.S. That’s basically unchanged now for two weeks. There are 38% more homes now than a year ago.
New listings at the peak for the year
There are two reasons that inventory is probably around the peak for the year. We can see that the new listings rate continues to be restricted. There are just not that many people who are anxious to sell their homes in this environment.
The other reason is the withdrawals. For every two homes going into contract each week, there’s a third withdrawn for lack of an offer. Sellers may try the market, not find any takers and then decide not to sell. The longer this slowdown goes, the more would-be sellers build up, and this is why we should anticipate inventory to keep gradually climbing back to normal levels in the next year or two. If mortgage rates fall substantially, inventory will dry up.
There were 62,000 new single-family listings unsold this week. With another 12,000 new listings that are already in contract. This is a bit more than a year ago but still significantly fewer sellers each week than in the pre-pandemic era.
Pending home sales keep a lid on inventory
For each of the new contracts pending, there’s a third home withdrawn from the market. There were 62,000 new contracts started for single-family homes this week, and another 30,000 or so withdrawals. Both of these phenomena work at the margins to keep a lid on inventory.
We’re on pace to do about 4 million existing home sales in 2024. If you follow the MBA’s purchase mortgage applications index, it had its low point last year at the end of September too.
Home prices see annual increase recede
Even as the supply of homes on the market is no longer growing, the prices that people are paying for homes is easing down. Home prices are not falling, but the annual increase seems to be receding a bit.
The median price of the newly pending home sales is $380,000 this week. That’s a notch down from last week and is barely above the same week a year ago.
Price reductions have peaked
Price reductions seem to have peaked, in part due to increasing levels of withdrawals from the market. I expect a fourth quarter climb in price reductions before the holidays, but nothing like the last two years. In those times, spiking mortgage rates surprised sellers, slowed the market, and caused those price cuts to accelerate. We have the opposite conditions now.
The big trends from earlier in the year are shifting now. If buyers finally start moving, we’ll see it in the data quickly. Maybe mortgage rates have finally turned the corner? For buyers and sellers, these conditions can change fast and it can be very impactful for smart decision making.
Mike Simonsen is the founder of Altos Research.
