Home sales and home prices have been improving for several weeks. Unfortunately, this period could be fleeting, because we had strong economic news last week. Ironically, a strong employment situation in the country drives the bond market to higher rates. After the recent lows with mortgage rates this week, the 30-year fixed rate jumped back up over 6.5%. It looks like the September refinance boomlet has backed off. The purchase market is slower to respond, and the data now is still showing the positive impact of lower rates of recent weeks.
Mortgage rates bounced back up over the last couple days, and it demonstrates how fragile this housing market recovery could be. The fact is that as mortgage rates fell closer to 6% home prices and home sales have been showing pretty obvious gains over last year. Leading indicators, such as price reductions, have topped out. Even the withdrawal rate of frustrated home sellers declined over the last month.
Last year’s home sales were low. There were very few buyers in the fourth quarter 2023. So, having more now isn’t like a big accomplishment, but it shows that consumers do get motivated as the cost of money gets cheaper. Conversely, if mortgage rates don’t stay low, we’ve seen homebuyers very willing to wait. The conventional wisdom is that mortgage rates will generally continue to move lower, but there’s no reason that must be true, as evidenced in the last few days.
Pending home sales continue to climb
There are 362,000 single-family homes under contract. That’s been climbing all September from 357,000 earlier in the month. It was just under a 1% increase this week. This is measuring the total count of homes that are under contract now. We’re showing 6% more homes under contract now than last year.
Homes stay under contract for 30 to 40 days. At the end of the month, a bunch of sales close. There’s a step down each month for the first week of the month. Next week, we’ll start October with fewer sales still in the process.
Home prices ticks up
The median price for the homes that people are buying — those that went under contract this week — is $395,000. It has surprised me that for four weeks in a row, this measure of home prices has ticked up. Usually, we expect home prices to ease down in the fall.
These new pendings prices rose by 1.25% this week, to $395,000 and are 5% greater than a year ago.
In the last two years, when October had sharply higher mortgage rates, home sales were tanking and prices were dropping. The opposite is happening now. I don’t expect this to continue. But, this is a stronger signal than I expected for resilience of the homebuyer. This is the price point people are buying. This recent trend implies that the yearly home price appreciation has a little more room than we’ve been expecting.
The median price of all the homes on the market is now $440,000, that’s unchanged from last year.
Inventory is up
The available inventory of unsold homes on the market ticked up to 734,000 single-family homes. That’s up half a percent for the week and is 36.7% more homes on the market than a year ago.
Some of the sun belt states, like Arizona, Texas and Florida haven’t topped out with inventory yet. Texas has 44% more homes on the market that last year and 24% more unsold homes on the market now than in 2019. Arizona has 70% more homes on the market now than a year ago. Nationally, we have 36.7% more homes unsold than last year, but we’re still 23% fewer homes on the market now than in 2019. There are eight states with more inventory now than in 2019.
New listings
There were 61,000 new listings unsold this week — down a few percentage points for the week and a fraction more than a year ago.
The immediate sales are at their lowest levels since we started tracking during the pandemic. These are the bidding wars and homes that get offers immediately after listing. These are the best homes in the best locations that are properly priced and well marketed. It’s notable that, while we’re measuring a slight pickup in total sales and the prices being paid are holding firm, the urgency of buyers is not increasing. Homebuyers are in a much stronger position than they have been in many years.
Price reductions stay flat
Just about 40% of the homes on the market have taken a price reduction from the original list price. This percentage has been staying flat for a couple months now. One way to measure the slight improvement in homebuyer demand over the last month is that price reductions haven’t climbed at all.
Rates spiked in the autumn of 2022. At that time, the pace of withdrawals accelerated and price cuts climbed.
It’s wild how quickly the sentiment can change in a week. We were maybe at a transition point to see some home sales growth, and suddenly we had a big mortgage rate spike. Buyers can put the brakes on quickly.
Mike Simonsen is the founder of Altos Research.
