Despite Powell's Grinch act, housing market data is positive

Federal Reserve Chairman Jerome Powell played Grinch for the housing market last week after his remarks on Wednesday. Nevertheless, we had positive data on our , purchase requests and weekly pending contract numbers. Total active listings are experiencing their traditional seasonal dip, but with less than two weeks left in the year, it's clear that America has ready home buyers. However, in 2025, we need the bottom line to increase sales in a bigger way.

Buy app data

Purchase application data grew 1% week-over-week and 6% year-over-year, even with a higher bar to work with. In the past two years, we've seen an increase in purchase programs in November and December, both of which came when mortgage rates fell. However, mortgage interest rates have increased during this period this year. I believe seasonal demand for buyout programs now occurs in November and December, which explains the stronger data this year and the past few years.

Buy apps in the last 10 weeks:

The past few weeks have shown a positive year-over-year growth trend, as shown in the chart below. I usually ignore the last two weeks of the year and Mortgage Bankers Association won't report those numbers until the new year. Therefore, I would like to conclude that 2024 ended the year somewhat positively.

When mortgage rates were higher at the beginning of the year (6.75-7.50%), purchase application data looked like this:

• 14 negative prints
• 2 flat print
• 2 positive prints

When mortgage rates started to fall, buyout programs looked like this:

• 12 positive prints
• 5 negative prints
• 1 flat print

With the above data on how the market is reacting to higher mortgage rates, I can understand some people being surprised by our data. The latest available home sales report was also beaten to the upside; I wrote about.

Weekly expected sales

The latest weekly pending contract data provides an interesting look at the real-time dynamics of housing demand. While it's common to see a seasonal dip in volume this time of year, there is a silver lining: we're seeing solid year-over-year growth when comparing data to 2022 and 2023.

This positive trend shows that, despite typical slowdowns, it is showing some promising resilience as we head into the end of the year! Here are the expected weekly sales for the past week over the previous several years:

• 2024: 293,555
• 2023: 267,033
• 2022: 263,937

10-year income and mortgage interest

I include:

• It is for mortgage interest rates between 7.25%-5.75%
• 10-year yield range of 4.25%-3.21%

Last week was for mortgage interest. Chairman Powell's announcements created a ripple effect in the market. The 10-year yield rose after the Fed's press release and later as Grinch Powell spoke more.

However, as the inflation report softened, bond yields fell and mortgage rates also fell. Even so, it was still a tough week for both rates and the 10-year yield.

Mortgage spreads

The unsung hero of the housing market in 2024 was improving mortgage spreads. What was a concern last year has turned into a positive story this year. If mortgage spreads hadn't improved in 2024, the housing debate we'd be having today would be quite different — especially given what happened last week.

If we experienced the peak negative spreads of 2023, mortgage rates would be closer to 8%. On the other hand, if mortgage spreads were at normal levels, we could expect mortgage rates to be around 0.72% to 0.82% lower. Last week showed that even with rising interest rates, the housing market has fared much better this year than last year thanks to more favorable spreads.

Weekly housing inventory data

As we enter the last weeks of the year, we usually . However, I am excited by the story behind the current market – inventory is up from the depressed levels we experienced in early 2022.

This shift has created a healthier housing market that has the potential to grow for years to come. Plus, we can go with low mortgage rates without going back on terms. This is a positive trend that bodes well for the future.

• Weekly inventory change (December 13-December 20): Inventory has dropped 682,150 for 667,466
• Same week last year (December 14-December 21): Inventory fell 538,767 for 528,601
• The all-time inventory level was in 2022 240,497
• Inventory peak for 2024 so far 739,434
• For some context, active listings for this week in 2015 were 1,013,245.

New Announcements

The new listing data shows a typical decline for this time of year. Although I didn't reach my forecast levels or my target of 80,000 during the peak seasonal months this year, I only managed to reach 5,000. I still consider it a positive result. Over the past five years, the number of weekly new listings has fallen between about 30,000 and 90,000. In contrast, during the housing bubble crash years, the range was between 250,000 and 400,000.

New listing data for the past week over the last few years:

• 2024: 39,430
• 2023: 36,897
• 2022: 31,793

Price discount percentage

In an average year, it is common for about a third of all homes to reflect the normal dynamics of the housing market. Rising mortgage rates often lead to higher interest rates on homes and lower house prices. On the other hand, when mortgage rates fall, we usually see an increase in demand, which often stabilizes or even increases because we have recently experienced falling rates.

My house price forecast for 2024 was a 2.33% growth rate, but it looks like that estimate may be too low. I initially assumed that the seasonal price softness we see in the second half of each year would continue, but the latest data shows that home prices are firming. As a result, my forecast for 2024 may be too low.

Here are last week's price cuts compared to previous years. Let's see how this stacks up to current market sentiment:

• 2024: 37.4%
• 2023: 36.%
• 2022: 40%

Next week: Christmas week and new home sales

Merry Christmas week, everyone! This week we have a new home sales report, which becomes an important factor for the economy and the Fed as we look to 2025. I have shared some of my thoughts on housing startups. Oh, and don't forget, we'll have a few bond auctions this week too! Enjoy the festivities!

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