Would you be surprised if I said that more homes were sold this week than last year? How is that possible? These are both supply-constrained areas. So even though overall demand is lower this year, there are still more homes available than there is demand. Inventory also fell this week.
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This is not a story about too much demand
Two of the three leading indicators for home prices are declining year over year. There is some demand, but the price sensitive consumers are very price sensitive. Despite the total shutdown last fall, we can see a pick up in sales.
Altos Research monitors every home that is up for sale each week. We analyze all pricing, supply, and demand data, and all changes in that data, and we make it accessible to you before it is available in traditional channels.
Inventory drops again
The inventory of single-family homes on the market fell 2.5% this week, as buyers outnumber sellers as we move into springtime. There are currently 418,000 single-family homes on the market.
Inventory was at its lowest point last June. The absolute lowest inventory week was last Friday in March 2013, when only 241,000 homes were on the market. Today, 73% more homes are on the market than last year. This gap is expected to shrink. Remember that there are 49% fewer homes available on the market today than in 2019, before the pandemic.
In March 2013, interest rates were at 4% and buyers had slowed down dramatically. As would-be sellers tried to get listed before rates rose higher, inventory also started to build quickly.
Inventory had risen to over 400,000 by June and was increasing at a rapid pace each week. We are now at the bottom of this slope. Every week, you’ll see a smaller difference than last year’s inventory.
Normal years would see inventory rise each week as new inventory is added for spring buying season. The trend hasn’t even slowed with a 2.5% drop this week. This means that inventory will continue to fall for a few weeks more. It could fall by 1% or one-half percent before it flattens and rises in April.
Inventory will not surge, there is no indication.
I have said it before, but there is no evidence of inventory rising from any source. There are many theories about where future inventory will come from (recession or job losses, panicking investors), but they haven’t happened yet. This is crucial because it will be difficult for even the most dire predictions of a home price collapse to come true when there is such limited supply.
Although we are seeing more listings every week, the total number of new listings rates remains at an all-time low. Each week, there are only a few sellers. There were 68,000 new listings this week, with 18,000 going into contract almost immediately.
Last year, there were 74,000 new listings and 24,000 went into contract immediately. It’s amazing to me that we have 18,000 immediate sales in this 7% interest environment.
I was talking with a friend about his dream home. He was in a competitive process with three other potential buyers. It is rare to find the right home at the right price. It goes quickly. We will have less inventory than last year with 7% fewer listings.
Slowdown in market prices
The market slowdown can be clearly seen. Two of the three leading indicators for home prices are lower than last year. This is likely to be helping demand.
This week’s median listing price is $389,900. Last year it was $399,000. This is the red line. Last year, sellers were still embracing that momentum and prices continued to climb quickly. This momentum is gone, and prices are moving in the opposite direction.
This week, the median price for single-family homes in the U.S. was $424,999 — an increase of about 1% over last week. Because prices tend to cluster around round numbers, I expect we will see this price point for several weeks. The year-over-year price increases get smaller each week.
It is important to remember that although home prices are not declining, the trend is worsening compared to last year. Prices were increasing faster each week last year. This shows that consumers are still buying homes, but they are more sensitive to affordability.
There is no evidence of a housing crash
Also, there is no evidence that the housing market has crashed. It looked like there might have been a crash last fall, but the facts keep dispelling these dire predictions each week. As I mentioned, the headlines will likely show negative year-over–year home price changes in the coming months.
If a severe recession occurs later in the year with many job losses, this could lead to a significant slowdown in housing.
It’s not surprising that this week saw more homes being sold than last year. 69,000 pending this week, compared to 68,000 last year. Both of these markets have limited supply. If there had been more to sell, we would have seen a lot more sales last year. We might have a few more sales if there was more product on the market.
This week has seen more new contracts than any other week for the longest time. We now have 20% less homes under contract than we did in that time. 326,000 homes are now in contract compared to 404,000 back then. It was evident that the market was much slower in the second half last year. Despite this, sales are increasing.
There are fewer houses with price reductions
With the recent price cuts data, we can see the spring market starting to take shape. With 31% of homes on the market having experienced a recent price reduction, we are likely at a low year. This is just a fraction of the number that was last week. As we enter the second quarter, homes that haven’t sold yet will begin taking price reductions. This number will rise in the coming weeks.
These videos are centered on the United States, but many local markets behave surprisingly differently.
Altos Research’s founder and president is Mike Simonsen.