The most positive development in the housing market in 2024 has been the increase in the number of active housing units, approaching the levels seen in 2019. do from 2020 to 2023.
In the first few years of the COVID-19 recovery, there was an unhealthy imbalance, with too many buyers competing for too few households. For example, in March 2022, there were only 240,000 homes available for sale. Now, as we look ahead to 2025, the market is in a much better position if mortgage rates fall to 6%, which was not the case before.
Weekly housing inventory data
On Monday’s episode of the HousingWire Daily podcast, I’ll be discussing the year 2024 and reviewing the housing market. I want to emphasize a key point that I found interesting: the increase in inventory did not lead to the massive decline in national housing prices that many so-called housing experts have been predicting for years. Instead, we are slowly returning to a normal market and moving away from the unhealthy housing inventory conditions we have seen.
- Weekly inventory changes (Dec. 20-Dec. 27): Inventory has fallen 667,466 to 650,992
- In the same week last year (Dec. 22-Dec. 29): Inventory fell from 528,601 to 513,240
- 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 994,396
New listing
The new listing data for 2024 tells a good story, even if it fell short of my expectations of a weekly seasonal peak of 80,000 minimum. New top listings come in at over 75,000 weekly. If we have a typical market year, for example, between 2013 to 2019, monthly new listings reached between 80,000 and 110,000. However, that was not the case two years ago.
I was hoping that the numbers would be closer to normal this year, but although we didn’t reach that, we did see growth, which is encouraging. For context, remember that new listing data was between 250,000 and 400,000 per week during the housing bubble years.
Last week’s new listing data for the last few years:
- 2024: 32,462
- 2023: 24,462
- 2022: 19,128
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 have seen recently with the decline in prices.
My original forecast for home price growth in 2024 was 2.33%, but recent data suggests it may be much lower. Initially, I expected a general seasonal drop in prices during the second half of the year, but emerging trends show that home prices are holding up better than I thought.
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: 36.4%
- 2023: 35%
- 2022: 38%
Weekly pending sales
The latest weekly pending contract data from Altos Research provides valuable insight into real-time trends in housing demand. In the last 10 weeks of the year, there has been an increase in pending contracts year over year compared to 2022 and 2023 even though mortgage rates have increased.
While it doesn’t take much to see a turnaround from the lowest sales levels on record, this suggests that a solid bottom has been established. However, I noticed that the sales data was down last week compared to recent trends. This is something to watch out for, especially if mortgage rates continue to rise until 2025. And, if mortgage rates come down again, we’ll have more home equity than at any other time in the last few years.
Weekly pending contracts for the last week over the past few years:
- 2024: 269,337
- 2023: 258,368
- 2022: 251,722
Buy apps
Shopping request data was not released during the holiday week but will resume next week. In the last 10 weeks of the year, there were six good weeks compared to four bad weeks despite rising mortgage rates. This trend reflects the seasonal demand we’ve often seen around this time in the past few years. This year looked strange because prices were going up, while prices were going down in the last two years.
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%
The 10-year yield remained steady last week, resulting in little movement in mortgage rates. Credit spreads have had a positive effect on rates, especially considering that the 10-year yield is near annual highs. Earlier this year, when 10-year yields were 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 lending. What was a challenge last year has turned into something positive this year. Without this positive shift in real estate spreads, our conversations about the real estate market would look very different today – especially given the recent events we’ve seen over the past 10 years.
Mortgage rates would be closer to 8% if we were facing the highest negative spread in 2023. Using the worst spread rates in 2023 to today, we will see an additional 0.84% in the loan ratio. On the other hand, if mortgage spreads were at normal levels, we would expect mortgage rates to be about 0.69% to 0.79% lower today.
Next week: Pending home sales and home prices
I will be open Yahoo Finance on Monday morning to discuss the results of the pending home sale. We also have home price data scheduled for this week, as well as a few ISM manufacturing reports and bond sales.
We will keep a close eye on the 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 1,000 to 226,500. The key level for me from 2022 is 323,000 on a four-week average: if we are indeed going into recession, that is the target level the data can reach.
It will be a light week for trading because of the holidays, but stay tuned for the podcast on December 31st, where I recap the Real Estate Market Forecast 2025 and talk further about innovation.
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