Real State

Housing market data is positive despite Powell’s Grinch behavior

The Federal Reserve Chairman Jerome Powell played the Grinch last week in the housing market, sending mortgage rates higher after his comments on the Fed’s press conference on Wednesday. In addition to this, we had positive data on existing home sales, purchase applications, and our weekly pending contract figures. The number of active listings is experiencing its traditional seasonal decline, but with less than two weeks left in the year, it’s clear that there are buyers ready to buy homes in America. However, we need lower loan rates to increase sales significantly by 2025.

Buy app data

Shopping app data is up 1% weekly and up 6% year-over-year, even a high bar to work from. Over the past two years, we’ve seen an increase in purchase applications in November and December, both of which came when mortgage rates dropped. However, this year, mortgage rates have increased during this time. I believe that seasonal demand for app purchases now occurs in November and December, and that explains the strong data this year and the past few years.

Purchase apps in the last 10 weeks:

The last few weeks have shown a positive year-on-year growth trend, as shown in the chart below. I usually ignore the last two weeks of the year, as well Mortgage Bankers Association it won’t report those figures until the new year. Therefore, I would like to conclude that 2024 ended the year well.

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

With the above data on how the market is reacting to higher mortgage rates, I can understand some people’s surprise at our Housing Market Tracker data. The last available house sales report hit the top, too; which I wrote about here.

Weekly pending sales

The latest weekly pending contract data from Altos Research provides an interesting snapshot of the real-time dynamics of housing demand. While it is common to see seasonal volume increases at this time of year, there is a silver lining: we were noticing strong year-over-year growth when comparing our data to 2022 and 2023.

This positive trend suggests that despite the general downturn, the housing market is showing promising resilience as we head towards the end of the year! Here are the weekly pending sales for the past few years:

  • 2024: 293,555
  • 2023: 267,033
  • 2022: 263,937
chart visualization

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%

Last week there was an uproar over housing costs. Chairman Powell’s statements created a negative impact on the market. The 10-year yield rose after the Fed’s press release and then continued to rise as Grinch Powell spoke louder.

However, after the inflation report came in soft, bond yields fell, and mortgage rates also fell. Despite this, it was still a challenging week for both prices and the 10-year yield.

chart visualization

Mortgage spreads

The unsung hero of the housing market in 2024 has been the improvement in mortgage spreads. What was a problem last year has turned into a positive story this year. If credit spreads hadn’t improved by 2024, our discussions about housing would be very different today – especially considering the events of the past week.

Mortgage rates would have been closer to 8% if we had experienced the high negative spread of 2023. On the other hand, if mortgage spreads were normal, we would expect mortgage rates to be about 0.72% to 0.82% lower. Last week it showed that despite rising rates, the housing market performed much better this year than last year, thanks to a very good spread.

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Weekly housing inventory data

As we enter the final weeks of the year, we typically see a decline in home prices. However, I am happy with the story behind the current market – inventory has grown from the depressed levels we experienced in early 2022.

This change has created a healthy housing market with the ability to thrive for years to come. Plus, we can navigate lower mortgage rates without falling back into brutally unhealthy situations. It is a good habit that shows a good future.

  • Weekly inventory changes (Dec. 13-Dec. 20): Inventory decreased from 682,150 to 667,466
  • In the same week last year (Dec.14-Dec. 21): Inventory fell from 538,767 to 528,601
  • The all-time inventory low was in 2022 240,497
  • 2024 peak inventory so far 739,434
  • In other context, active listings for this week in 2015 were 1,013,245
chart visualization

New List

The new listing data shows a general decline for this time of year. Although I did not reach my forecast levels this year or the 80,000 target during the peak months of the season, I came close, falling short by only about 5,000. I still consider this a good result. Over the past five years, weekly categories of new listings have fallen between 30,000 and 90,000. In contrast, during the years of the housing bubble crash, the range was between 250,000 and 400,000.

Last week’s new listing data for the last few years:

  • 2024: 39,430
  • 2023: 36,897
  • 2022: 31,793
chart visualization

Discount percentages

In an average year, it is common for about one-third of all homes to see a price reduction, reflecting the general volatility of the housing market. An increase in mortgage rates often leads to an increase in mortgage rates, lowering their value. On the other hand, when mortgage rates go down, we usually see an increase in demand, which often stabilizes or even increases housing prices, as we’ve seen recently with the decline in prices.

My home price forecast for 2024 was a growth rate of 2.33%, but it appears that this rate may be much lower. I initially thought that the seasonal price softening we usually see in the second half of the year would continue, but the latest data shows that home prices are holding up. As a result, my forecast for 2024 may be too low.

Here are the percentages of last week’s price reductions compared to previous years. Let’s see how this fits with current market sentiment:

  • 2024: 37.4%
  • 2023: 36.%
  • 2022: 40%
chart visualization

Next week: Christmas week and new home sales

Happy Christmas week, everyone! We have a new housing sales report coming out this week, which is an important indicator for the economy and the Fed as we look to 2025. I shared some thoughts on this in my recent article about real estate startups. Oh, and don’t forget, we’ll have a few bond sales happening this week, too! Enjoy the festivities!


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