Has spring housing demand begun?

Admin January 5, 2025

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Has the spring home buying season already begun? Our weekly pending contract data has shown year-over-year growth for some time now, even with higher mortgage rates. I believe spring demand actually started in November this year – a trend that has been reflected in the rising sales data we’ve seen during the winter months in recent years.

However, we need to remember that the existing home sales data is working from low sales levels, so it doesn’t take much to move the needle as I discussed. Yahoo Finance recently.

Weekly pending sales

The latest weekly pending contract data from Altos Research provides valuable insight into real-time trends in housing demand. For a long time now, it has been showing positive growth compared to both 2022 and 2023 data, and, in the first few days of 2025, compared to 2024 data. We have a low single digit increase in demand year over year.

It’s a shame that mortgage rates increased 1% from September because existing home sales would have had monthly prints of about 4.5 million. Towards the end of 2022 and 2023 when prices fell by more than 1%, we saw an increase in demand of about 500,000. Now, pending home sales have risen for four months in a row, so over time, we’ll lose the very low bar we’ve been working with. However, it was nice to see demand pick up in the last few months of 2024.

Weekly pending contracts for the last week over the past few years:

2025: 260,329
2024: 247,652
2023: 231,127

Buy app data

My rule of thumb: I don’t track application data during the last two weeks of the year because very few people come out to complete applications during Christmas and New Year’s week. Also, Christmas and New Year fell on a weekday this year, which could throw off people’s travel plans. Before those last two weeks, we recorded six positive and four negative weekly results for higher mortgage rates. We will start tracking purchase request data again next week, even though this past week was New Year’s.

10-year yield and housing rates

My prediction for 2025 included:

Loan rates range between 7.25% -5.75%
10-year yield range between 4.70%-3.80%

Recently, the 10-year yield has been hovering around the 4.60% level, showing little significant movement either way. We are close to the 10-year forecast for the 2025 yield and loan amount. As we head into jobs week, I wrote about the importance of labor data on mortgage rates in 2025 and highlighted which data points needed more attention in this article.

Mortgage rates stayed briefly above my 7.25% target in 2024, but for the most part, the range has been tight for most of the year because mortgage spreads have improved.

Mortgage spreads

If mortgage spreads had not improved by 2024, we would have lost more construction workers to rising prices. However, we should be thankful that the spread improved last year and remains positive.

If we apply the worst-case spread rates from 2023 to today’s rates, we will see an increase in the value of the loan by 0.77%, bringing us closer to 8%. On the other hand, if mortgage spreads were normal, we would expect mortgage rates to be about 0.76% to 0.86% lower today.

Weekly housing inventory data

We’re headed to 2025, and historically, home prices have tended to drop in March and April, at least following the COVID pandemic. In the last decade before that, we would see the inventory bottom at the end of January or February and then the inventory would start to go up. Last year’s lowest point for innovation was in February, so we will monitor this closely.

I don’t want the inventory to hit its lowest point in April, as that would be too late in the year.

Weekly inventory change (Dec. 27-Jan. 3): Inventory has fallen 650,992 to 635,432
In the same week last year (Dec. 29-Jan. 5): Inventory fell from 513,240 to 499,143
The all-time inventory low was in 2022 240,497
The 2024 asset peak was 739,434
In another context, the active listing for the same week in 2015 was 959,028

New listing

I am very excited about the new listing data this year. Last year, I expected growth, and although we saw growth, it did not reach the levels I had intended. However, I was happy when I saw the growth.

It is important to remember that most sellers are buyers and the last two years have presented the lowest listing data in history. This means that we can look forward to 2025 as the year when things return to normal, and we should expect to see some weeks when the new listing data reaches between 80,000-110,000 in the high season.

Last week was a holiday week, so new listing data was absorbed; things will be back to normal soon. This also explains why people shouldn’t take the last two weeks of the year with purchase request data seriously, either.

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

2025: 18,484
2024: 35,698
2023: 31,995

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.

We are experiencing seasonal fluctuations in this data line, and will monitor this closely for any changes in the data, especially as prices trend up or down.

2025: 34.9%
2024: 33%
2023: 36%

Next week: A week of jobs, bond auctions and Fed speeches

It’s going to be a busy week ahead! We have a jobs week, which includes all four jobs reports, as well as bond sales, Global PMI data, the release of Fed minutes and speeches from some hawkish Fed presidents. Considering we are at a critical level in the bond market, this week could be wild. As always, we’ll look at frivolous claims data every Thursday. Last week, it fell again.