More Sellers, Fewer Buyers

Summary

In 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.