Rising inventory is the most positive housing market story in 2024

The most positive development in 2024 was active growth approaching the levels seen in 2019. While those 2019 levels represented a five-decade low before COVID-19, the market still performed better than in 2020. Until 2023.

During the first few years of the 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 for sale. Now, as we look to 2025, if the market goes down to 6%, it's in a better position than it was before.

Weekly housing inventory data

On Monday's show, I'll discuss the 2024 housing market review. I want to emphasize a key point that I find interesting: the increase in inventory has not led to the significant national result that many so-called housing experts have been predicting for years. Instead, we are gradually returning to a more normal market and moving away from the housing inventory conditions we have seen.

• Weekly inventory change (December 20-December 27): Inventory has dropped 667,466 for 650,992
• Same week last year (December 22-December 29): Inventory fell 528,601 for 513,240
• The all-time inventory level was in 2022 240,497
• Inventory peak for 2024 so far 739,434
• For some context, these were the active listings for this week in 2015 994,396

New announcements

The new listings data for 2024 tells a positive story, though it doesn't reach the minimum weekly peak target of 80,000 I expect. The highest New listings came in at just over 75,000 weekly. When we have a standard market year, for example, between 2013 and 2019, monthly peak new listings reached between 80,000 and 110,000. But in the last two years, nothing like that happened.

I was hoping that the numbers would be close to normal this year, but even though we didn't achieve that, we did see an increase, which is encouraging. For context, remember that new listings data ranged from 250,000 to 400,000 per week during the housing crash years.

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

• 2024: 32,462
• 2023: 24,462
• 2022: 19,128

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 initial forecast for home price growth in 2024 was 2.33%, but recent data suggests this may be much lower. Initially, I expected the usual seasonal decline in prices in the second half of the year, but the emerging trends show that house prices have risen better than I thought.

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

• 2024: 36.4%
• 2023: 35%
• 2022: 38%

Weekly expected sales

The latest weekly pending contract data offers valuable insight into real-time trends in housing demand. Despite rising mortgage rates in the last 10 weeks of the year, there was a year-over-year increase in pending contracts compared to 2022 and 2023.

Although it doesn't take long to see changes in the lowest selling levels, it indicates that a firmer bottom has been established. However, last week I saw sales data slow compared to recent trends. This is something to monitor, especially if mortgage rates continue to rise through 2025. Also, if mortgage rates go down again, we'll have more housing stock than we've had in the past few years.

Last week's expected weekly contracts over the past few years:

• 2024: 269,337
• 2023: 258,368
• 2022: 251,722

Buy apps

Purchase order data was not released during the holiday week, but will continue 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 have typically seen during this period over the past few years. This year seemed strange because the rates were going up, whereas the previous two years the rates were going down.

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%

The 10-year yield remained relatively flat last week, resulting in little movement in mortgage rates. Favorable mortgage spreads have contributed positively to rates, especially given that 10-year yields are near annual highs. Earlier this year, when 10-year yields were similarly high, mortgage rates were 40 to 50 basis points higher.

Mortgage spreads

Another success story for the housing market in 2024 was the significant improvement in mortgage spreads. What was a problem last year has turned into a positive variable this year. Without this positive shift in mortgage spreads, our discussion of the housing market would look very different today – especially given the recent events we've witnessed over the last 10 years.

If we experienced the peak negative spreads of 2023, mortgage rates would be closer to 8%. Applying the worst-case spread levels in 2023 to today, we would see an additional 0.84% ​​in mortgage rates. On the other hand, if mortgage spreads were normal, we would expect mortgage rates to be around 0.69% to 0.79% lower today.

Next week: Pending home sales and home prices

i will be Yahoo Finance Monday morning to discuss the results of pending home sales. We also have information on home prices scheduled for this week, along with several ISM manufacturing reports and bond auctions.

Since labor is more important than inflation, we'll be watching the jobless claims data closely each week. Last week, jobless claims fell by 1,000 to 219,000, the lowest level in a month. The four-week moving average rose 1,000 to 226,500. The key level for me since 2022 has been the four-week average of 323,000: if we are indeed in a recession, this is the target level the data will reach.

It will be a light trading week due to the holidays, but keep an eye out for a podcast on December 31st where I'll be recapping HousingWire and talking more about inventory.

Related