As 2024 draws to a close, we’re noticing a significant increase in housing inventory, with numbers beginning to mirror those from 2019.
This trend offers a glimmer of hope for an improved market.
One of the most promising developments in this year’s housing landscape has been the rise in active inventory, which is approaching the levels seen back in 2019.
It’s important to remember that despite 2019 being characterized as a low point for inventory in five decades, it represented a healthier market compared to the post-COVID climate from 2020 to 2023.
Following the pandemic, the market was riddled with challenges, primarily an imbalance where a high number of buyers competed for a limited selection of homes.
For context, in March 2022, the inventory had plummeted to just 240,000 homes.
Fast forward to our current outlook for 2025, and we’re observing a distinctly better situation—especially if mortgage rates continue trending down towards 6%.
A Weekly Snapshot of Inventory
In my upcoming analysis featured on the HousingWire Daily podcast, I will provide more details about this year’s housing market.
A key finding is that the recent boost in inventory hasn’t resulted in the widespread drop in home prices that many industry experts anticipated.
Instead, we’re witnessing a shift back to more typical market dynamics, moving away from the past few years of unfavorable conditions.
- Weekly inventory change (Dec. 20-Dec. 27): Decreased from 667,466 to 650,992
- Year-over-year (Dec. 22-Dec. 29): Dropped from 528,601 to 513,240
- 2022 recorded the lowest inventory level at 240,497
- The peak inventory for 2024 so far reached 739,434
- For perspective, weekly active listings in 2015 totaled 994,396.
Examining new listings for 2024, we see an encouraging narrative, though we haven’t quite hit my target of at least 80,000 for seasonal weekly peaks.
The highest recorded weekly new listings were just over 75,000.
Comparatively, during the years from 2013 to 2019, peak monthly new listings typically fell between 80,000 and 110,000, in stark contrast to recent years’ figures.
Trends in Price Reductions
Typically, in a standard market year, about one-third of homes will experience a price reduction.
This percentage fluctuates in response to mortgage rate changes.
Conversely, a dip in mortgage rates tends to spur demand, stabilizing or even increasing home prices—an observation we’ve noted with the recent rate declines.
Earlier this year, I projected a home-price increase of 2.33% for 2024, but current data suggests I may have underestimated this growth.
Although I anticipated the usual seasonal dip in prices during the latter half of the year, it appears that home prices have proven to be surprisingly resilient.
- 2024: 36.4%
- 2023: 35%
- 2022: 38%
Recent weekly pending contract data from Altos Research offers valuable insights into current housing demand.
Over the last ten weeks, we’ve seen an increase in pending contracts year-over-year compared to both 2022 and 2023, even amidst rising mortgage rates.
While the improvement from the lows recorded in sales is modest, it does signal that a firmer foundation has been established in the market.
However, last week showed a deceleration in sales compared to the recent upward trajectory—a trend worthy of attention, especially if mortgage rates continue to rise as we approach 2025.
If we see a decrease in rates, we can expect more available housing inventory than we’ve witnessed in recent years.
- 2024: 269,337
- 2023: 258,368
- 2022: 251,722
Data on purchase applications weren’t available during the holiday week, but we expect it to resume next week.
In the last ten weeks of the year, we’ve recorded six instances of positive outcomes against four negatives, despite rising mortgage rates.
This aligns with the seasonal demand trends we’ve observed in previous years, though this year has been unusual due to the upward tick in rates, contrasting sharply with the declines witnessed in 2022 and 2023.
In my projections for 2024, I anticipated mortgage rates ranging between 7.25% and 5.75%, alongside a 10-year yield fluctuating from 4.25% to 3.21%.
The 10-year yield has exhibited stability, resulting in minimal fluctuations in mortgage rates.
Favorable conditions surrounding mortgage spreads have positively impacted rates, especially considering the 10-year yield nearing its annual peaks.
Earlier this year, similar yield levels were seen with mortgage rates that were 40 to 50 basis points higher.
Analysis of Mortgage Spreads
A noteworthy development this year has been the significant improvement in mortgage spreads.
What once posed challenges is now contributing positively.
Current trends indicate that mortgage rates could have been near 8% had we still been dealing with the peak negative spreads experienced in 2023.
If we apply last year’s worst spread levels to today’s context, it would mean an increase of nearly 0.84% in the mortgage rate.
Conversely, under normal spread conditions, mortgage rates would be expected to be approximately 0.69% to 0.79% lower than they currently are.
On Monday morning, I’ll be featured on Yahoo Finance to discuss the latest pending home sales results.
We can also expect home price data shortly, along with several reports on ISM manufacturing and bond auctions.
We’ll keep a close eye on the weekly jobless claims data, as labor market conditions have been overshadowing inflation concerns.
Last week, jobless claims dipped slightly by 1,000 to reach 219,000—marking the lowest level in a month.
Meanwhile, the four-week average rose by 1,000 to 226,500.
Since 2022, I’ve identified the 323,000 mark on the four-week average as a crucial threshold; if a recession is on the horizon, this statistic will be critical to track.
While this week may see lighter trading due to the holiday season, be sure to tune in to the podcast on December 31, where I’ll recap the HousingWire outlook for 2025 and delve deeper into ongoing inventory trends.
Source: Housingwire