Since mid-2022 when mortgage rates headed higher, two facts have been apparent: new listings data has been trending at the lowest levels ever recorded in history and inventory has been able to grow from record low levels thanks to mortgage rates staying elevated. We’ve seen some growth in new listings this year compared to 2023 levels, which is good for housing. However, with the recent spike in mortgage rates, it’s possible some sellers are just going to call it quits. Let’s see what the data for last week tells us.
New listings data
One place to see whether home sellers are calling it quits is our new listings data, which would clearly show if home sellers are reluctant to list their homes. So far, I haven’t seen anything to make me believe that is the case, including last week, as we saw only a slight decline in new listings data.
While I didn’t get my weekly minimum 80,000 forecast for new listings data this year during the seasonal peak months, the fact that we’ve seen some growth is positive for 2024. So far, I haven’t seen anything yet showing that higher mortgage rates have negatively impacted the new listings. I hope this data line’s seasonal decline stays consistent with slight year-over-year growth.
Here are the new listings for last week over the past several years:
- 2024: 60,158
- 2023: 56,634
- 2022: 56,522
Weekly housing inventory data
If we were seeing a surge of sellers calling it quits, it would also impact the active listing data. Even though we saw a slight decline last week, I wouldn’t say it’s due to higher mortgage rates.
For a brief period this year, I was getting my dream housing inventory data line with rising inventory tied into my model of 11,000-17,000 homes a week with lower mortgage rates and positive, forward-looking demand. That has changed recently; the inventory growth rate has slowed and it went negative last week. As we have seen the past few years, we are getting closer to where we will see a seasonal decline in active listing, so the decline week to week isn’t a big deal.
We do have data on sellers withdrawing their listing; that is an avenue to see if sellers in the market just give up. However, the slight week-to-week decline isn’t saying much for the active listings since it’s almost Halloween. As you can see, we have made progress in inventory growth year after year.
- Weekly inventory change (Oct. 18-Oct. 25): Inventory fell from 739,434 to 737,997
- The same week last year (Oct. 20-Oct. 27): Inventory rose from 554,350 to 562,556
- The all-time inventory bottom was in 2022 at 240,497
- The yearly inventory peak for 2024 so far is 739,434
- For some context, active listings for this week in 2015 were 1,168,936
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. Rising mortgage rates last year and this year have created a growing number of price cuts. With the reality of rising rates and rising inventory, the price-cut percentage data should be elevated compared to times when rates were lower and mortgage demand was growing.
A few months ago, on the HousingWire Daily podcast, I said price-growth data would cool down in the year’s second half. Now, I am 100% surprised that pricing has stayed as firm as it has in our weekly data, so my forecast of 2.33% national home price growth is in jeopardy of being too low.
Here are the price-cut percentages for last week over the previous few years:
- 2024: 39.5%
- 2023: 39%
- 2022: 43%
10-year yield and mortgage rates
My 2024 forecast included:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
We have had a lot of confused consumers, mortgage loan officers, and real estate agents over the last five weeks. I understand the shock of seeing mortgage rates rise as fast as they did. CNBC recently asked me to talk about this. If you want a deeper explanation on why mortgage rates have gone up since the Fed rate cut, I covered this topic in a recent HousingWire Daily podcast. We have jobs week coming up, which can move the bond market; what none of us want to see is the 10-year yield breaking above 4.40%, which would send mortgage rates higher.
Mortgage spreads
The mortgage spread story has been positive in 2024, whereas it was negative in 2023. We have seen a big move already this year; mortgage rates would be much higher today without the spreads improving. Unfortunately, the spreads have worsened with the recent spike in mortgage rates. Still, if I took the worst spreads from last year, mortgage rates would be 0.75% higher today. If mortgage spreads were back to normal, you would see mortgage rates lower by 0.71%—0.81%.
Weekly pending sales
Below is the Altos Research 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 should remember how high mortgage rates were at this time last year. We are now showing growth versus 2023 and 2022 data in this data line, but context is critical. 2022 sales had the fastest crash ever, and 2023 home sales were at record low levels, so take the growth in context with those two truths.
Imagine if mortgage rates stayed at 6% for 12 months; if that was the case, sales would be growing easily year over year. We have plenty more housing inventory this year versus last to promote growth sales when rates go lower.
This is the weekly pending sales for last week over the previous few years:
- 2024: 356,127
- 2023: 319,464
- 2022: 339.016
Purchase application data
The winning streak of purchase application data ended with higher rates and now we have back-to-back negative weeks. Last week’s drop almost put us into flat year-over-year territory, even with extremely low comps. Purchase apps were down 5% week to week and only up 3% year over year.
When mortgage rates were running higher earlier in the year (between 6.75%-7.50%), this is what the purchase application data looked like:
- 14 negative prints
- 2 flat prints
- 2 positive prints
Since mortgage rates started falling in mid-June, here’s what purchase applications looked like:
- 12 positive prints
- 5 negative prints
- 1 flat
- 3 straight positive year-over-year growth prints
With mortgage rates up again, here is where we are:
- 2 negative prints
- 0 positive weekly prints
We only have back-to-back positive year-over-year data due to a low bar.
The week ahead: Jobs, inflation, bond auctions and home prices
Are you ready for a Halloween week of data that can drive bond yields screaming one way or another? This is it! We have jobs week, plus inflation data with the PCE reports, a few bond auctions and national home price reports.
Of course, labor over inflation always drives yields lower. Weaker labor data drove yields lower from June to September and jobs week last month beat estimates and sent bond yields higher. The key for this week is to see how the bond market reacts to each labor report because we have made a near-70-basis-point move higher in the 10-year yield since the morning the Fed cut rates. For the 10-year yield, the critical level that we don’t want to exceed is 4.40%.
