The holiday season is upon us, and despite last week’s high mortgage rates, housing demand is showing some holiday resilience. In general, we expect a decrease in activity with higher prices, but the seasonal increase helps the data of the purchase application in the last month. Additionally, our outstanding contracts are still showing double-digit growth year over year. Let’s take a look at this week’s Tracker data to see if this trend can continue through 2024.
Weekly pending sales
Weekly pending contract data from Altos Research gives us a good peek into real-time housing demand. As with most real estate information, we are currently in the midst of a seasonal drop in volume, which is very common this time of year. Loan amounts were collected last week, although that did not have a significant impact on our pending contract data, which shows good year-over-year growth compared to 2022 and 2023.
Remember, we are coming off some of the lowest levels ever, so we have to take these little bumps with a grain of salt. It’s encouraging to see us getting some solid ground, which I discussed in this recent HousingWire Daily podcast.
Here are the weekly pending sales for the past few years:
- 2024: 304,034
- 2023: 275,022
- 2022: 277,102
Buy app data
Weekly data for shopping apps showed a week-on-week decline of 4%. The raw data showed a 30% profit, but we often ignore that number. Year on year, the data remains positive, growing by 4%. Purchasing apps look 30-90 days before this housing demand hits sales data.
Unlike our lowest comparisons in October and early November, the current data shows an official year-over-year growth trend. I would be surprised if we see another positive year-over-year result next week, but buy requests did better than average. Traditionally, the seasonal housing squeeze will begin after the second week of January, but in the past few years, it has started in November.
In the weekly data, as mortgage rates have recently increased, this is what the data looks like
- 5 fine prints
- 4 negative prints
While mortgage rates are rising at the beginning of the year (between 6.75%-7.50%), this is how the purchase application data looks like:
- 14 negative prints
- 2 flat prints
- 2 fine prints
When mortgage rates started to drop in mid-June, here’s what the purchase requests looked like:
- 12 fine prints
- 5 negative prints
- 1 flat print
In terms of how high prices have affected the data this year, it will be interesting to see if we don’t have a negative note next week because prices do matter, but for now, there is a slight increase year over year.
10-year yield and housing rates
My prediction for 2024 included:
- Loan rates range between 7.25% -5.75%
- 10-year yield range between 4.25%-3.21%
The 10-year yield rose sharply last week, rising from 4.13% to 4.40% on future expectations. The Federal Reserve meeting. Additionally, the Atlanta Fed reported that US economic growth is expected to exceed 3% again. We’re still looking at lower bond yields, with current levels testing the upper channel ahead of the Fed meeting, indicating that next week will be interesting.
Although mortgage rates rose, the rise was not as sharp as expected, as mortgage spreads improved this week. Over the past two years, housing demand has improved when the 10-year yield fell enough to get mortgage rates close to 6%.
Mortgage spreads
I can’t stress enough how good mortgage spreads have been for the housing market and the economy in general. If spreads had been as unfavorable as last year, we would have seen fewer housing permits and starts, and we could have faced a loss of construction jobs in some parts of the US.
Despite the recent rise in 10-year yields, mortgage rates have done better than ever because spreads haven’t gotten worse. If we had a worse spread from last year, loan rates would be 0.60 percent higher today. Conversely, if mortgage spreads were to return to normal, we would expect mortgage rates to drop by about 0.73% to 0.83%. Last week is a good example: even when prices went up, this year turned out to be much better than last year because of the excellent spread.
Frivolous claims
It’s the first time I’ve entered data on idle claims into a weekly tracker. It’s important because one key factor that could push rates below my 5.75% forecast threshold is a possible slowdown in the labor market. In particular, if the idle claims in the four-week moving averages rise to 323,000, that would be significant.
Last week, we saw a significant increase in the index, which many attributed to the holidays disrupting labor data. Well, here are the latest numbers: the number of people filing benefits for the first time after a job split rose by 17,000, to 242,000. Meanwhile, the four-week moving average rose 5,750, bringing it to 224,250.
Weekly housing inventory data
We are experiencing a seasonal decline in house prices, which seems to be normal. A good idea for housing in 2024 is that we have created a good buffer with our inventory data – something we could not do from 2020-2023. I’m excited about the asset growth we see in 2024.
- Weekly inventory changes (Dec. 6-Dec. 13): Inventory has fallen since 690,015 to 682,150
- In the same week last year (Dec. 7-Dec. 14): Inventory fell from 546,424 to 538,767
- The all-time inventory low was in 2022 240,497
- 2024 peak inventory so far 739,434
- In another context, the active listing for this week in 2015 was 1,050780
New List
New listings data last week showed its typical seasonal decline, but we also saw the usual Thanksgiving bounce-back that happens every year. Thanksgiving came one week later this year, hence the one-week delay in weekly housing data. It is encouraging to see some growth in this data line, although it has fallen short of my target levels for this year. All in all, this is a positive development for the US It was a very bad story in 2023 when new listings are trending at the lowest levels ever recorded in history.
New listing data for last week:
- 2024: 45,284
- 2023: 39,613
- 2022: 34,973
Discount percentages
In an average year, about one-third of all homes receive a price reduction, which is a common occurrence in the housing market. When housing prices rise, the percentage of homes that reduce their prices increases significantly. On the contrary, this trend decreases when prices decrease, and demand increases, as we have seen recently with the decrease in rates.
I expected more softening in the second half of 2024 in prices, but according to our data lines, this did not happen as much as I thought, so my 2024 price forecast of 2.33% looks too low. The price drop in 2024 is another good story. One thing about 2024, when the demand for housing improves with mortgage rates up to 6%, that has an impact on the data for the percentage of rate reductions.
Here are last week’s price reduction percentages compared to previous years:
- 2024: 38.1%
- 2023: 38.%
- 2022: 41%
Next week: It’s Fed week, with tons of other reports too
We have an eventful week ahead, highlighted by the Fed meeting and key economic reports. When it comes to the Fed, the language they use this week is important. A rate cut of 0.25% is widely expected, but many also expect the Fed to notice in 2025 unless economic data suggests the need for an acceleration.
This week we can expect Global PMI reports, bond sales, builders survey index, housing starts, existing home sales, retail sales and more. Given that the 10-year yield has made a significant move over the past week, looking at how the market reacts to Fed announcements and economic reports will be important.
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