Here are last week’s new listings for the past few years:
- 2024: 62,876
- 2023: 57,229
- 2022: 59,458
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 created an increasing rate of discounting, especially when property values increase. When mortgage rates fell recently, the percentage amortization decreased gradually; now that loan rates are rising again, we will see how this affects this data line. The season will soon enter this data line, which usually falls towards the end of the year. As you can see below in the chart where our active inventory levels were at 240,000, the price reduction % was historically low, which is not healthy.
A few months ago, on the HousingWire Daily podcast, I discussed that price growth data will cool in the second half of the year. However, I am not sure if the cooling of the price increase will match my forecast for 2024, which has prices increasing by 2.33% per year. It looks like I may be too low.
The data for the percentage of price reductions is below the 2022 levels and risks the previous season’s curve below 2022 and 2023. However, mortgage rates have increased recently so we will see if that changes the data in a positive way in the last 10 weeks of the year.
Here are the last week’s price reduction percentages over the last few years:
- 2024: 39.62%
- 2023: 38%
- 2022: 42%
10-year yields and loan rates
My prediction for 2024 included:
- Loan rates range between 7.25%-5.75%
- 10 year yield range in between 4.25%-3.21%
I predict a range of channels with mortgage rates and 10-year yields because we can all follow the most important economic data and look for key turning points and rates. This is the slow dance with 10-year yields and 30-year mortgage rates that I often discuss.
I have an important line in the sand around 3.80% on the 10-year bond, and in 2024, with a better mortgage spread, that equates to loan rates around 6.25%. For mortgage rates to be lower than this, stay below or even lower, you need weak economic data. We recently had a series of economic and labor data that beat expectations. This podcast goes into that and explains what happened on the day the Fed cut rates and after the jobs on Friday.
We track all data, but the key is always working on inflation. If the jobs data came in as a big miss, we would have a different discussion today, but that didn’t happen.
Mortgage spreads
The story of the distribution of mortgages was positive in 2024, and negative in 2023. We have seen a lot of movement this year; Mortgage rates would be much higher today without the improvement in spreads. So, as bad as some people in the mortgage community feel, it could have been worse. We are not back to normal with spreads, but it is a good sign that spreads started to improve before the Fed cut rates, and over time, this has room to decrease.
Buy app data
Mortgage rates rose again last week. While that increase didn’t have much of an impact on last week’s data because the push to the top happened last Friday, we should see another impact of the rate hike in the data area next week.
Let’s take a look at what the data does when loan rates rise 6.75% to 7.50% at the beginning of the year. 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 eight weeks of great trending shopping apps. Then, as has been the norm lately, mortgage rates skyrocketed, and demand disappeared.
Here’s what weekly mortgage application data looks like as mortgage rates start to drop in mid-June:
- 12 fine prints
- 5 negative prints
- 6 straight weeks of good stuff, and last week’s data was down, making it the best 7 weeks of the year.
- 3 consecutive weeks of positive year-over-year data last week reached 8% positive year-over-year growth
Throughout the year we will be looking at how high prices affect the data. Recently it has been low but history says that doesn’t last, especially when prices go up.
Weekly pending sales
Below is weekly contract data for Altos pending to reflect 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. The weekly data was strengthened when the rates fell, but now we need to see how this data looks with rising rates. Although it has lost a little steam, there is nothing serious about the data.
Here are the weekly pending sales for the past week over the past few years:
- 2024: 350,455
- 2023: 325,584
- 2022: 351,527
Next week: Cooked speeches, retail and estate sales begin
We will have several Fed presidents speaking this week, including Kashkari and Waller; be aware of that. We also have bond sales and retail sales this week. Real estate data will be interesting – data for purchasing applications should show a bite from rising prices. Builder confidence won’t show that spike yet, but we’ll be able to see their logic at rates closer to 6%. Finally, with some bond auctions in the mix, we’ll have housing starts on Friday – a data line that beat expectations last month and started sending the 10-year yield higher.
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