Housing demand is in distress, so the fact that our pending contract data is strengthening recently indicates that low mortgage rates have stabilized and strengthened demand recently.
It will probably take mortgage rates to go below 6% and stay there for a long time to get strong demand growth from low sales levels. However, considering the challenges of the housing market’s affordability, it is good to see a change in housing data without rates that get less than 6%.
Weekly pending sales
Below is Altos weekly pending contract data to show real-time demand. Now, this line of data is very seasonal, as we can see in the chart below, and we all know that mortgage rates were around 8% last year, so we need to keep in mind the favorable data from year to year. However, weekly pending contract data has been confirmed recently, even during the late season downturn. I will be curious to see if it continues because, due to the state of the year, it shouldn’t, but for now, here we are.
- 2024: 362,620
- 2023: 340,526
- 2022: 380,823
Buy app data
Even though mortgage rates rose slightly this week, a successful streak of consecutive positive buyout programs continues with five weeks of gains. We also had our first positive annual print run since 2022. Again, the bar is low as rates were at 8% last year, and we are at historic lows.
This is what the weekly purchase demand data looks like with rising prices starting in the last half of January:
- 14 negative prints
- 2 flat prints
- 2 fine prints
Although the purchase order data did not show a significant drop in volumes at the beginning of the year, the weekly data was not very positive. Before the end of January, when prices started to rise, we had 8 weeks of positive trending buying apps, and the rising prices made the data a very negative curve.
Here’s what weekly mortgage application data looks like as mortgage rates start to drop in mid-June:
- 11 fine prints
- 5 negative prints
- 5 straight weeks of great benefits
- The first fine printing of each year from 2022
The ups and downs in volume this year haven’t been much, but we can see the difference in the data now.
10-year yields and loan rates
My prediction for 2024 included:
- Loan rates range between 7.25% -5.75%
- 10-year yield range between 4.25%-3.21%
Since the house started to rate the data bit on the day the Fed announced a rate cut and we had a series of better economic data, the 10-year yield has started to rise and is sitting in a small channel between 3.70%-3.80%, which means that mortgage rates have jumped slightly from the decline the latest. Since we’re probably headed for a bearish forecast, I need to see weaker economic data, better mortgage spreads or a stronger Fed to take mortgage rates below 5.75%.
Mortgage spreads
The story of the distribution of mortgages was positive in 2024, and negative in 2023. We’ve seen a lot of movement, which has helped us, and we still have some runway left to get back to historical norms. This could help lower mortgage rates to 5.75%. If we take the worst spreads from 2023 and include today’s, the loan rates would be 0.78% more. At the same time, we are not far from average in terms of spread, as it still is 0.75% are higher today than the 2022 lows in the chart below.
Weekly housing inventory data
The last two weeks have been the best asset growth week for me in 2024, as we reach my range of models without high loan rates; I gave it a chef’s kiss. We could not reverse that this week as asset growth slowed 5,768. However, whatever happens in the next three months, the best story for me in 2024 was to get active listings at the levels we saw in 2020-2023.
- Weekly inventory changes (Sept. 20-Sept. 27): Inventory increased from 725,249 to 731,017
- In the same week last year (Sept. 21-Sept. 28): Inventory increased from 528,797 to 534,746
- The all-time inventory low was in 2022 240,497
- The annual peak value for 2024 is 731,017
- In another context, the active listing for this week in 2015 was 1,188,505
New listing data
Another positive line of data this year is that new listings grew from the lowest levels ever recorded in 2023. Since most sellers are buyers, we need this data line to return to the pre-COVID-19 trend range, which it has not yet done. I could not do from the second half of 2022. However, even if I’m down 5,000 from my 2024 minimum enrollment forecast of 80,000 during the peak of the season, this is still a good year compared to 2023.
- 2024: 63,022
2023: 56,168 - 2022: 59,780
Discount percentages
In an average year, one-third of all households reduce prices – this is a common real estate activity. The increase in mortgage rates last year and this year has led to an increasing rate of discounting, especially with rising assets. This data line has decreased as prices have decreased. In my price forecast for 2024, I was on the shallow end of price growth since I only had actual home prices known in 2024, which means that only 2.3% home price gains in 2024.
A few months ago, on the HousingWire Daily podcast, I discussed that price growth data will cool in the second half of the year. The data for the percentage of price reductions is below the 2022 levels and risks the previous season’s curve below 2022 and 2023. This has more vocabulary than both years, which surprises some people. However, we can see here that lower prices have been reducing the percentage of recent price reduction data.
Here are the last week’s price reduction percentages over the last few years:
- 2024: 39%
- 2023: 38%
- 2022: 42%
Next week: A week of jobs and Fed speeches
Labor for inflation: We have a lot of labor data coming out with the jobs week around the corner. Also, the bond market has shown that it doesn’t want to go down unless it has to, so how the bond market reacts to the data this week will be very interesting! Powell and several other Fed presidents will be speaking this week, so add that to the list of activities and we better get ready for some buzz this week!
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