Why housing demand is now showing year-on-year growth

We've had three weeks of positive year-over-year growth in both procurement application data and weekly pending contract data, with last week showing a significant jump from last year. Now a dose of reality: this time last year, and 2023 was even worse with 8% rates, even though it showed record low sales. So context is very important, especially with housing data in October. Let's take a look at this week's numbers.

Weekly expected sales

Below is weekly expected contract data to show real-time demand. As we can see in the chart below, this data line is very seasonal, and we remember how high mortgage rates were at this time last year. We are now showing growth in this data line over 2023 and 2022, but context is key. 2022 sales crashed the fastest ever, and 2023 home sales were at record lows, so take the growth in context with these two facts.

Here are the expected weekly sales for the past week over the past several years:

• 2024: 357,675
• 2023: 324,675
• 2022: 343,942

Buy app data

Purchase application data's winning streak has ended as mortgage rates rise. We had six weeks of positive data and then one straight week before rates rose. Purchase programs fell 7% week-over-week last week, still showing year-over-year growth, but we can see the impact of higher rates in this week's data.

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

Purchase program data since mortgage rates began falling in mid-June:

• 12 positive prints
• 6 negative prints
• 1 apartment
• 3 straight positive growth tracks year over year

We'll be watching this data to see if the damage done by the recently higher rates. History has shown us that when rates rise, demand data stops growing.

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%

I forecast the channel ranges with mortgage rates and 10-year yields because we can all watch economic data that matters together and look for important inflection points in rates. It's the slow dance between 10-year yields and 30-year mortgage rates that I often discuss.

I have a solid line in the sand for a 10 year yield around 3.80%. We need weaker economic data to break below that or even lower. We got it when the workweek data showed a softer labor market, but many of the latest data beat expectations. I explained this in detail.

With recent economic data such as retail sales and jobless claims being positive, we ended last week with a 10-year yield of 4.08%.

Mortgage spreads

The mortgage spread story was positive in 2024 and negative in 2023. This year we have already seen a huge movement; If spreads hadn't improved, mortgage rates would be higher today. Unfortunately, with the recent jump in mortgage rates, spreads have gotten a bit worse. Again, if I were to take the worse spreads from last year, mortgage rates would be 0.72% higher today. If mortgage spreads were to return to normal levels, you would see mortgage rates fall 0.71% – 0.81%.

Weekly housing inventory data

Five weeks ago, we had the best week of inventory growth in 2024 as we hit my model range even without higher mortgage rates. Inventory growth two weeks ago was slightly negatively impacted by hurricanes on the East Coast. We had an inventory increase of 7,024 homes last week. It was a good week for active inventory growth, although not in my pattern of 11,000-17,000 inventory growth with higher rates.

• Weekly inventory change (October 11 – October 18): inventory has gone up 732,410 for 739,434
• Same week last year (October 12-October 19): inventory rose 546,450 for 554,350
• The all-time inventory level in 2022 was 240,497
• The annual inventory peak for 2024 is 739,434
• For some context, active listings for this week in 2015 were 1,171,775

New listing information

New listing data is another positive story in 2024 as we need more sellers! I didn't reach my goal of at least 80,000 in the peak months of the season — I'm down 5,000 — but I see that as a win because 2024 was the second-lowest new listing data year in history, down from 2023, which was the lowest.

• 2024: 60,361
• 2023: 56,772
• 2022: 57,762

Price discount percentage

On average, one-third of all households buy a home per year – this is standard housing activity. Rising mortgage rates last year and this year, especially. When mortgage rates fell recently, the discount rate cooled.

A few months ago, , I said that inflation data would cool off in the second half of the year. Interest rate cuts are lower than 2022 levels and risk an earlier seasonal curve than in 2022 and 2023. We'll have to see if higher mortgage rates change this data line before we see a seasonal downward trend in inventory. I have to say, I've been a little surprised at how well prices have held up in our weekly data lately.

Here are the discount percentages for the past week over the last few years:

• 2024: 39.5%
• 2023: 38%
• 2022: 43%

Next week: Fed speeches and home sales data

There will be more speeches from Fed presidents this week, plus existing home and new home sales data. Keep in mind that this week's existing and new home sales reports will not take into account the recent higher mortgage rates. That's why we focus on our weekly housing data, which shows that higher mortgage rates are already distorting purchase application data. I debated this and said that we don't need 3% or 4% mortgage rates to boost sales from these depressed levels, but we do need rates to get to 6% and stay there.

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