The most positive development in the housing market over 2024 has been the increase in active housing inventory, which is approaching the levels seen in 2019. Although those 2019 levels represent a five-decade low before COVID-19, the market was still functioning better than it did from 2020 to 2023.
During the first few years of COVID-19 recovery, there was an unhealthy imbalance, with too many buyers competing for too few homes. For example, in March 2022, there were only 240,000 homes available for sale. Now, as we look ahead to 2025, the market is in a much better position if mortgage rates fall toward 6%, something that wasn’t the case before.
Weekly housing inventory data
On Monday’s episode of the HousingWire Daily podcast, I will be discussing the 2024 year in review of the housing market. I want to emphasize a key point that I’ve found interesting: the increase in inventory hasn’t led to the significant national home-price crash that many so-called housing experts have predicted for years. Instead, we are gradually returning to a more normal market and moving away from the savagely unhealthy housing inventory conditions we’ve seen.
- Weekly inventory change (Dec. 20-Dec. 27): Inventory fell from 667,466 to 650,992
- The same week last year (Dec. 22-Dec. 29): Inventory fell from 528,601 to 513,240
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 so far is 739,434
- For some context, active listings for this week in 2015 were 994,396
New listings
The new listings data for 2024 tells a positive story, even though it fell short of my anticipated target of a seasonal weekly peak of 80,000 minimum. Typically, new listings came in a bit over 75,000 weekly. When we have a standard market year, for example, between 2013 to 2019, peak monthly new listings reached between 80,000 and 110,000. However, this has not been the case in the past two years.
I was hoping for numbers closer to normal this year, but while we didn’t achieve that, we did observed growth, which is encouraging. For context, remember that during the housing crash bubble years, new listings data ranged between 250,000 and 400,000 per week.
New listings data for last week over the past few years:
- 2024: 32,462
- 2023: 24,462
- 2022: 19,128
Price-cut percentage
In an average year, it’s common for about one-third of all homes to see a price cut, reflecting the usual dynamics of the housing market. Rising mortgage rates often lead to an increase in the percentage of homes, reducing their prices. On the flip side, when mortgage rates drop, we typically see a rise in demand, which often stabilizes or even boosts home prices, as we’ve recently experienced with falling rates.
My original forecast for home-price growth in 2024 was 2.33%, but recent data suggests that I might be too low. Initially, I anticipated the usual seasonal decline in prices during the second half of the year, but emerging trends show that home prices held up better than I thought.
Here are last week’s price-cut percentages compared to previous years. Let’s see how this aligns with current market sentiments:
- 2024: 36.4%
- 2023: 35%
- 2022: 38%
Weekly pending sales
The latest weekly pending contract data from Altos Research offers valuable insights into real-time trends in housing demand. Over the last 10 weeks of the year, there has been an increase in year-over-year pending contracts compared to 2022 and 2023, despite rising mortgage rates.
While it doesn’t take much to see changes from the lowest sales levels on record, this suggests that a firmer bottom has been established. However, I noticed that sales data slowed down last week compared to recent trends. This is something to monitor, especially if mortgage rates continue to rise going into 2025. Also, if mortgage rates do fall again, we currently have a lot more housing inventory than at any other time over the past few years.
Weekly pending contracts last week over the past several years:
- 2024: 269,337
- 2023: 258,368
- 2022: 251,722
Purchase applications
Purchase application data was not released during the holiday week, but it will resume next week. In the last 10 weeks of the year, there were six positive weeks compared to four negative weeks, despite rising mortgage rates. This trend reflects the seasonal demand we typically see during this period.
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%
The 10-year yield remained fairly stable last week, resulting in little movement in mortgage rates. Favorable mortgage spreads contributed positively to rates, especially considering that the 10-year yield is near its yearly highs. Earlier this year, when the 10-year yield was similarly high, mortgage rates were 40 to 50 basis points higher.
Mortgage spreads
Another success story for the housing market in 2024 has been the significant improvement in mortgage spreads. What posed a challenge last year has become a strong asset this year. Without this positive shift in mortgage spreads, our discussions about the housing market would look very different today — especially given the recent events we’ve witnessed with the 10-year.
Mortgage rates would be near 8% if we were experiencing the peak negative spreads of 2023. Applying the worst levels of the spreads in 2023 to today, we would see an additional 0.84% on the mortgage rate. On the other hand, if mortgage spreads were at normal levels, we could expect mortgage rates to be approximately 0.69% to 0.79% lower today.
The week ahead: Pending home sales and home prices
I will be on Yahoo Finance Monday morning to discuss the results of pending home sales. We also have home-price data scheduled for this week, along with a few ISM manufacturing reports and bond auctions.
Each week, we will closely monitor jobless claims data, as labor is more important than inflation. Last week’s jobless claims fell by 1,000 to 219,000, the lowest level in a month. The four-week moving average rose by 1,000 to 226,500. The key level for me since 2022 has been 323,000 on the four-week average: if we are truly going into a recession, that is the target level that the data would go to.
It’s going to be a light trading week due to the holidays, but keep an eye out for the podcast on Dec. 31 where I recap the HousingWire 2025 Housing Market Forecast and talk further about inventory.
