More Sellers, Fewer Buyers
Summary
TLDRIn this comprehensive update on the U.S. real estate market for the end of February 2024, Mike Simonson of Altos Research delves into the current trends affecting home buying and selling. With an increase in inventory and a notable rise in mortgage rates, the market is experiencing a shift. The report highlights a 16% year-over-year increase in unsold home inventory and a 100 basis point rise in mortgage rates compared to last year. Despite the challenges, there's still growth in new listings and sales, although the pace is fragile. The analysis also covers the dynamics of price reductions and the impact of mortgage rates on home prices, offering insights into the future of the housing market.
Takeaways
- 🔴 Price reductions increased for the first time since November due to rising mortgage rates and growing inventory.
- 📈 Inventory across the country is on the rise, contributing to a decrease in home buying affordability.
- 🕐 Sales pace has slightly decreased, highlighting the impact of higher mortgage rates on slowing home buyer demand.
- 📲 Mortgage rates are about 100 basis points higher than last year, leading to more inventory and softer future sales price indicators.
- 📉 There are more sellers and new listings compared to last year, allowing inventory to build and potentially leading to more home sales this year, despite a fragile sales growth rate.
- 📊 Mortgage rates in the 'sevens' or higher could significantly affect home prices, continuing the trend of softening growth signals.
- 📄 Mike Simonson from Altos Research emphasizes the importance of tracking real-time data on pricing, supply, demand, and sales changes for accurate market analysis.
- 🛠 Inventory has increased by 16% compared to last year and is 53% higher than two years ago, correlating with higher mortgage rates.
- 🔧 New single family home sales dipped by 2% compared to last week, indicating a slight reduction in sales growth from last year due to affordability challenges.
- 📆 The percentage of homes with price reductions ticked up to 30.4% from 30.0% last week, suggesting a normal seasonal uptick in price cuts but also a slowing momentum in the housing market.
Q & A
What impact have rising mortgage rates had on the U.S. real estate market as of the end of February 2024?
-Rising mortgage rates have led to a decrease in home buyer demand, an increase in inventory levels, and softer future sales price indicators compared to the previous year.
How has the inventory of unsold single family homes changed in the U.S. as of the end of February 2024?
-As of the end of February 2024, there are 498,000 single family homes available unsold on the market in the U.S., which is 70 basis points more than the previous week and 16% more than the same time last year.
What is the expected trend for unsold inventory in the U.S. real estate market?
-The expected trend is for unsold inventory to continue building, with no data indicating a decline in inventory levels for the remainder of the season.
How have mortgage rates changed compared to last year and two years ago?
-Mortgage rates are roughly 100 basis points higher than last year and 400 basis points higher than two years ago.
What has been the trend in new listings and home sales growth rate in 2024?
-In 2024, there are more new listings each week compared to the previous year, allowing inventory to build and eventually leading to more home sales this year than last. However, the sales growth rate is considered fragile.
What was the percentage of homes that had their prices reduced in the market?
-As of the end of February 2024, 30.4% of homes on the market had their prices reduced from the original price, up from 30.0% the previous week.
What is the significance of the uptick in price reductions in the housing market?
-The uptick in price reductions indicates a slowing momentum in the housing market. It's the first time since before the pandemic to start to resemble old normal market behavior, but it's still within the normal range of price reductions, indicating that sellers are generally getting their prices.
What has been the effect of rising mortgage rates on the number of new contracts for single family home sales?
-Rising mortgage rates have led to a slight dip in the number of new contracts for single family home sales, with 59,000 new sales started this week, which is 2% fewer than last week and just a fraction fewer than the same week in 2023.
What are the expectations for home prices and sales in the coming months?
-While home prices are not expected to decline in 2024, the appreciation rate may not be as strong as in previous years. Sales growth is expected to be consistent over last year by mid-March, with rising inventory and selection for buyers potentially lifting the cap on total transaction volume.
How does Altoos Research track and analyze the real estate market?
-Altoos Research tracks every home for sale in the country on a weekly basis, monitoring all pricing, supply and demand, sales, and changes in data, making it available immediately as it happens to provide a real-time view of the market.
Outlines
🏠 Home prices and inventory trends in late February 2024
Paragraph 1 discusses the recent uptick in home price reductions and rising inventory levels across the US, in response to higher mortgage rates and declining affordability. It highlights how demand is slowing as rates climb, allowing supply to accumulate. Compared to last year, there are more new listings but sales growth is fragile if rates stay elevated.
😕 Sales growth struggling but expected to improve
Paragraph 2 notes how new pending home sales dipped this week compared to last year due to affordability issues, but expects consistent year-over-year growth by mid-March as inventory restrictions from last year are lifted. As long as economic data stays strong, sales should rise even amidst higher rates and growing supply.
📉 Early signals of price growth deceleration
Paragraph 3 points out early signs of slowing home price appreciation, including an increase in price cuts on listed homes and a small dip in median pending sales prices. However, it emphasizes that prices remain above 2023 levels and are not declining, just softening from earlier heated growth.
Mindmap
Keywords
💡mortgage rates
💡inventory
💡sales rate
💡price reductions
💡affordability
💡home price appreciation
💡bidding wars
💡pending sales
💡median listing price
💡median sales price
Highlights
Mortgage rates are roughly 100 basis points higher than last year, leading to 16% more inventory and slowing home buyer demand.
Higher mortgage rates drive up the available selection of unsold homes on the market. Inventory is still a third fewer than 2019 but keeps climbing.
Rising mortgage rates have not been cooperating with the sales rate trying to expand in 2024. Sales dipped 2% this week.
The percentage of homes with price reductions ticked up this week for the first time since November, indicating slowing momentum.
The median price of newly pending sales dipped 1% this week to $375,000. A concerning signal to monitor in coming weeks.
Home prices are not accelerating particularly quickly in early 2024 compared to last year. A notable softening of appreciation rates.
498,000 single family homes were available unsold this week, up 16% from last year as inventory builds.
59,000 new single family contracts started this week, down 2% from last week and flat with last year.
30.4% of homes on the market have reduced asking prices, up from 30% last week in a normal seasonal shift.
The median price of homes on the market is $429,000, up about 2% from last year.
New listings came on at a median $410,000 this week, jumping from prior week in normal volatility.
Home prices are not showing any signs of actual decline so far in 2024.
If mortgage rates climb into the upper 7s/8s again, home prices could turn negative.
Leading indicators for home prices are notably softer than last February, pointing to lower appreciation rates ahead.
Buyers and sellers need to see actual market data to set accurate expectations in this environment.
Transcripts
price reductions ticked up this week for
the first time since November in the
face of rising mortgage rates inventory
is rising across the country too as home
buying affordability takes another hit
the pace of sales inch down this week
also so we can see exactly the impact of
higher mortgage rates slowing home buyer
demand as demand slows inventory grows
last year at this time we are actually
seeing surprising home buyer Demand with
rates having fallen into the low sixes
now mortgage rates are roughly 100 basis
points higher and as a result the uh
inventory is higher and the future sales
price indicators are also softer than
they were a year
ago we still see more sellers than last
year so each week there are more new
listings than a year ago allowing
inventory to build and eventually
leading to to more home sales this year
than last but that sales growth rate is
fragile
too if mortgages stay in the sevens or
keep climbing from here you can you can
see exactly what's uh going to happen to
home prices a week ago I mentioned that
some of the home price signals were
softening home prices aren't falling uh
but the growth signals are definitely
softening and that that Trend continues
this week uh the the housing market has
been changing very very rapidly this
year the economy has continued to be
strong so mortgage rates have defied
expectations and climbed higher that's
uh why at altoos research we track every
home for sale in the country every week
you can't just rely on the expectations
of what's going to happen we track all
the pricing all the supply and demand
all the sales all the changes in that
data and we make it available to you
immediately as it happens I'm Mike
Simonson I'm the founder of alos
research and let's take a look at the
details of the US real estate market for
the end of February
2024 so there are now
498,000 single family homes available
unsold on the market around the US
that's 70 basis points more than last
week and 16% more than last year at this
time so this is the first inventory
increase of the year the market will
continue to build unsold inventory from
here for for the rest of the season
there's nothing in the data that shows
inventory declining from here this
spring uh so uh you could get a little
bounce up or down but the trend is quite
clear mortgage rates are like I said
roughly 100 basis points higher than
last year at this time and inventory is
16% more rates are 400 basis points
higher than two years ago and inventory
is
53% higher higher rates creates more
inventory many uh mortgage rate
forecasters are still expecting a rate
reversal but until that actually comes
to fruition we will watch higher
mortgage rates drive up the available
selection of of unsold homes on the
market in this inventory chart you can
see this phenomenon we've shaded the red
periods for Rising mortgage rates and
the green for the periods when rates
fell uh we are now two years from the
low of mortgage rates and from the low
of inventory they both turn the corner
at the same time if we have another year
or two with rates in the sevens or or
higher we we should finally get back to
those old normal levels of inventory and
you can see how inventory is still a
third fewer than it was available in
2019 but it keeps climbing inching its
way closer every week that rates stay
elevated we've been sharing how the
sales rate has been trying to expand for
2024 unfortunately Rising mortgage rates
have not been cooperating so last week
showed good sales growth over 2023 and
uh I mentioned that it might be fleeting
and sure enough the number of new
contracts started this week dipped just
a little bit with
59,000 uh new single family home sales
started this week that's 2% fewer than
last week and it's just a fraction fewer
than the same week in
2023 uh any week where we have negative
sales growth from last year is a
disappointment at this at this point but
uh this is where you see affordability
and demand take a hit from higher
mortgage rates in this chart we're
showing uh all the homes that get offers
and go into contract uh the contract
pending stage in a given week these new
contracts pending are are shown here in
in curves for each of the last couple of
years the dark line at the Left End of
the chart is uh that's this year trying
to expand over 2023 and 2023 is really
restricted rate of sales uh but of
course affordability has not been
cooperating in the last uh six weeks or
so so I still suspect but that by
mid-march we'll see consistent sales
growth over last year the dark red line
will be generally above the the red line
of last year's rate uh at the time a
year ago the market was facing
dramatically restricted inventory now uh
buyers have more selection so that cap
on total transaction volume is lifted so
of course economic data uh like
unemployment for example keep coming in
very strong and so if mortgage rates
rise from here then home sales will drop
quickly and so you can see you'll see
this the dark red line here you start to
just not separate from the the brighter
Red Line curve from last year I think by
mid-march we'll see it grow though uh it
is important to note that we can have
rising in inventory and Rising sales at
the same time which is actually what I
expect the I just wish the the sales
rate were were climbing more quickly
more reliably each week would be nice to
see uh perhaps the most notable signal
this week is price cuts the percentage
of homes that uh have reduced their
asking price from the original price it
that ticked up this week so there are
now there are now 30.4% of the homes on
the market that have taken a price cut
that's up from 30.0% last week uh every
year has a cycle in price reductions
that after the holidays of fresh new
inventory gets listed so the percentage
that have taken a price cut declines
then in the spring some of that
inventory is still sitting on the market
so those sellers start cutting their
asking prices then later in the year
price Cuts accelerate as the summer
comes to a close and a peak just before
the holidays to start the cycle again in
the Years uh the pre PR pandemic years
uh this end of February time is actually
a normal time to start seeing an uptick
in price Cuts some of the boom years
though with all those crazy bidding wars
it took till much later in the spring
for the price cuts to actually inch back
into the trend so in this in this chart
each line is a year and you can see the
cycle very quick clearly the this is uh
this year is notable in that price Cuts
ticked up this week which is the first
time since before the Pand mic to start
to look like that old normal Market
Behavior so we're in the normal range
though of price reduction is that normal
zone is that's the gray band across the
chart here uh this meaning that sellers
are generally fine they're generally
getting their their prices there's no
signal of prices falling in this data
the uptake just shows us slowing
momentum uh in a couple of weeks though
we could be behind the pace of last year
meaning more sellers with price Cuts
than a year ago go last year at this
time we were seeing surprise surprising
home buyer Demand with rates in the low
sixes and so now rates are higher we see
the opposite Trend happening if we see
this year's line curve towards the top
of the gray band like quickly that would
be an indicator the next indicator of
home price weakness so we'll see it tick
up above last year but uh probably not
to the top of the uh that gray band
we're not there yet it is isn't a
catastrophic call for home price it is
simply very clear evidence of how home
buyers wait when mortgage rates stay
higher for
longer uh the the uh price of the homes
that went into contract this week dipped
a little bit too which was interesting
to note the median price of the newly
pending single family home sales uh was
$375,000 this week that's down from
378,000 last week almost a 1% dip uh
it's still 2% higher than a year ago go
uh it is normal to have a little bit of
noise in the pending prices you can see
a little up and down across the year but
it's it's not a straight line but uh it
is maybe unusual in this key part of the
buying season to see a down tick week
it's something to keep an eye on it's
one little tick uh this chart of home
prices going in this is home the prices
of homes going into contract it can be
very telling about demand the pink line
here from uh you can see from 22 had
sharp down moves in July and again in
October 22 uh this was the market
responding to those big jumps in
mortgage rates at the time so when the
prices on the new contracts dipped in
the second half of 22 that led to
year-over-year sales price declines in
the first half of
2023 so these contracts are the first
indication for those sales that will
close right now in March and
April the uh this week's could just be a
little noise in the data like I said but
if it proves persistent that would be a
very big signal
indeed uh we will keep watching the uh
dark red line here if it if it dips
further you can be sure that I will
highlight it for you uh prices dipped
this week but are still up over 2023 I
expect the dark R line to turn higher
with the season and Peak about 3% above
the 2022 number the all-time high in Q2
uh in a in a few months but we're going
to keep watching this over the next
several weeks of course just in case the
median price of all the homes on the
market in the US
is now
$429,000 that's up almost 1% from a week
ago and is a couple percent higher than
2023 at this time the this chart is of
home prices over time and the dark red
line here is uh the median price of all
the homes on the market across the
country at any given moment the median
price of the new listings this week is
$410,000 that's a pretty big jump from
the week prior the bright red line here
can jump big week to week it can do that
but uh you'd expect both lines to be
climbing generally for the spring the
dotted lines here help you see how much
the mark the market is just slightly
above last year at this time you can
also see the all-time high prices for
June of
22 uh home prices are up over last year
U but they are not accelerating
particularly quickly that's the
softening I've been talking
about uh so it'll be interesting to see
if we pass that Peak from two years ago
at elos we do not we do not seasonally
adjust the numbers like this is the
price of all the homes if you walk into
the market today and look around this is
what you can buy the median price of
single family homes in the US is $429
,000 right now uh I've so I've shared a
few signals for home prices softening
and I use the word softening to be
distinct from falling or declining home
prices are up over last year and do not
show any signs of declining in
2024 but in February of stronger home
price appreciation years we can see
these leading indicators pointing up and
you know at alos we track the active
housing market all the asking prices all
the changes in those prices and so that
we can see where sales will happen in
the
future looking at the far right end of
the chart here you can see the data for
the most recent weeks and the the
steeper those are climbing each week
then the greater the home price
appreciation will be for the whole year
uh and what we can see now is it's not a
very steep climb so you can see uh an
example of the really steep climb two
years ago at the tail end of the
pandemic boom uh buyers were squeezing
in before mortgage rates Rose and those
buyers were bidding home prices higher
each week that is not happening now even
last year the slope of these pricing
lines was steeper so last year ended
with three to 7% home price increases
depending on which index you use in
February the of last year the data was
showing the the surprising leading
indicators so this point last year they
were they were moving more steeply and
now the data is is notably softer so
we'll obviously be the first to point it
out if the home price signals turn
negative which they could if mortgage
rates jump into the upper sevens or 8%
again like that's something to keep a
watch out for it can be really hard to
communicate all this with buyers and
sellers these uh there are folks on the
sidelines who are waiting for rates to
drop so they can swoop in for sudden
bargains they may not realize that how
much competition is waiting right along
with them and meanwhile mortgage rates
are actually Rising so if you need to
help buyers and sellers see the actual
data you should join us at elos go to
alos research.com and book a free
consult with our team we will help you
know how to talk about the market with
your clients and Prospects today there's
a link in the description below to join
us click that and let's get
started
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