We’ve had three weeks of positive year-over-year growth in both purchase request data and weekly pending contract data, with last week showing a significant jump from last year. Now the dose of truth: last year at this time the loan rates were approaching 8%, and although 2023 showed lower levels of sales, it was worse at rates of 8%. Therefore, context is important for housing data, especially in October. Let’s take a look at this week’s numbers.
Weekly pending sales
Below is Altos weekly pending contract data to show real-time demand. This data line is very seasonal, as we can see in the chart below, and we remember how high mortgage rates were at this time last year. We are now showing growth compared to 2023 and 2022 data in this data line, but context is important. 2022 sales had the fastest crash ever and 2023 home sales were at a record low, so consider growth content with those two facts.
Here are the weekly pending sales for the past few years:
- 2024: 357,675
- 2023: 324,675
- 2022: 343,942
Buy app data
The winning streak of purchase order data has just ended as mortgage rates rise sharply. Before rates went up, we had six consecutive weeks of positive data and then one flat week. Last week, shopping apps were down 7% week-over-week, still showing year-over-year growth, but we can see the impact of higher prices in this week’s data.
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
Here’s the purchasing powerhouse data since mortgage rates started to drop in mid-June:
- 12 fine prints
- 6 negative prints
- 1 flat
- 3 positive positive growth prints year after year
We will track this data to see the damage done by the recent price increases. History has shown us that when prices go up, they limit the growth of data needed.
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%
I forecast 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 between 10-year yields and 30-year mortgage rates that I often discuss.
I have a significant line in the sand with a 10 year yield of about 3.80%. We need weak economic data to be below this or below. We got that when weekly jobs data showed a soft labor market, but most of the latest data lines beat expectations. I explained this in detail in this HousingWire Daily podcast.
As recent economic data such as retail sales and jobless claims suggest, we ended last week with the 10-year yield at 4.08%.
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 had spreads not improved. Unfortunately, with the recent increase in mortgage rates, the spread has gotten worse. However, if I take the worst spread from last year, the loan rates would be 0.72% higher today. If mortgage spreads were back to normal levels, you would see mortgage rates drop significantly 0.71% – 0.81%.
Weekly housing inventory data
In the last five weeks, we have had a very good week of asset growth in 2024 as we reach the range of my models even without high loan rates. In the past two weeks, inventory growth has been slightly negative, somewhat impacted by hurricanes on the East Coast. Last week, we had an increase of 7,024 homes. While this is not in my 11,000-17,000 asset growth model with high prices, it was a good week for active asset growth.
- Weekly inventory changes (Oct 11-Oct. 18): Inventory increased from 732,410 to 739,434
- In the same week last year (Oct. 12-Oct. 19): Inventory increased from 546,450 to 554,350
- The all-time inventory low was in 2022 at 240,497
- The annual peak inventory for 2024 is 739,434
- In other context, active listings for this week in 2015 were 1,171,775
New listing data
New listing data was another great story in 2024, as we needed more sellers! I didn’t reach my minimum goal of 80,000 during the peak months of the season – I was down 5,000 – but I consider it a win because even though 2024 was the second lowest listing data year, it beat 2023, which was the lowest.
- 2024: 60,361
- 2023: 56,772
- 2022: 57,762
Discount percentages
In an average year, one-third of all households reduce prices – this is a common real estate activity. The rise in mortgage rates last year and this year has created an increasing number of downgrades, especially with rising assets. When mortgage rates dropped recently, the percentage of the discount went down.
A few months ago, on the HousingWire Daily podcast, I said that price growth data would cool in the second half of the year. The data for the percentage of price reductions is below the 2022 levels and risks the pre-season curve below 2022 and 2023. We need to see if higher mortgage rates change this data line before we see a seasonal decline in inventories. I have to say that I am amazed at how price has held up in our weekly data lately.
Here are the last week’s price reduction percentages over the last few years:
- 2024: 39.5%
- 2023: 38%
- 2022: 43%
Next week: Cooked talks and home sales data
This week, we’ll have more Fed president speeches, as well as new home sales data. Keep in mind that the latest housing data is just starting and this week’s existing and new home sales reports will not reflect recent high mortgage rates. That’s why we focus on our weekly housing data, which shows that the highest mortgage rates have already entered the purchase application data. I discussed this on CNBC on Friday, saying that we don’t need 3% or 4% mortgage rates to increase sales from these depressed levels, but we need rates to get to 6% and stay there.
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