Key Takeaways:
– Inventory growth has not reached the desired range of 11,000 – 17,000
– Seasonal peak for housing inventory was reached in late October
– Weekly inventory change shows a slight increase compared to the same week last year
– New listing data has formed a bottom, indicating potential growth in the future
– Percentage of homes with price cuts is lower in 2023 compared to 2022
– Mortgage rates have fluctuated, but there is a possibility of rates decreasing if economic and labor data softens
– Purchase application data shows a mix of positive and negative prints
– Upcoming week will include inflation data, housing starts, and retail sales
– Moody’s downgrade of U.S. debt may cause bond market volatility in the short-term.
HousingWire:
Weekly housing inventory data
All I wanted for Thanksgiving and Christmas was just a few weeks of active inventory growth between 11,000 – 17,000. But even with mortgage rates getting as high as 8%, we’ve yet to hit within that range. With seasonality kicking in, it doesn’t look good for me this year.
Last year, according to Altos Research, the seasonal peak for housing inventory was Oct. 28. We might have reached the peak in inventory this week.
- Weekly inventory change (Nov. 3-Nov. 10): Inventory rose from 566,882 to 566,941
- Same week last year (Nov. 4-Nov 11): Inventory fell from 575,798 to 572,347
- The inventory bottom for 2022 was 240,194
- The inventory peak for 2023 so far is 566,941
- For context, active listings for this week in 2015 were 1,135,887
The one positive data line for inventory in 2023 is that new listing data has formed a bottom, and no matter how high mortgage rates have gone, we haven’t seen a brand-new low. Seven weeks ago, I said on CNBC that we should be forming a bottom with some flat year-over-year growth prints coming in the second half of 2023. We saw some good growth this week, and hopefully, in 2024, we can close the gap and get back to 2021-2022 data on new listings. That is the critical period for new listing data to grow; remember, most sellers are buyers.
Traditionally, one-third of all homes take price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts can grow. This is the crazy stat for 2023: even with higher home prices and rates recently, we haven’t been able to catch up to price cuts in 2022 when home prices were falling month to month.
Even as mortgage rates got to 8%, we have consistently been 4% below last year’s levels of price cuts. This explains why home prices fell last year, with crashing sales and a higher percentage of price cuts. This year’s home sales have been falling more slowly, and we have fewer price cuts, so prices have stayed firmer compared to 2022 levels.
- 2023: 39%
- 2022: 43%
- 2021: 28%
Mortgage rates and the 10-year yield
Mortgage rates started to fall on Oct. 23 and went from 8% to 7.38% on Nov. 3. Last week, mortgage rates rose toward 7.56%. We did have a lousy bond auction that sent the 10-year yield higher along with mortgage rates. The 10-year yield got as low as 4.48% before heading 18 basis points higher. In addition, Federal Reserve Chairman Powell gave a presentation where people believed his talking points were hawkish, but still, the real deal this week was the bad bond auction.
The history of mortgage rates and the 10-year yield has been that once the Fed is done hiking rates, the bond market rallies and mortgage rates head lower. So the question is, have mortgage rates peaked and the next move will be to under 7%, not over 8%? I believe this will be the case if the economic and labor data gets softer because the Fed has expressed concern about long-term rates being this high. However, this has always been about the labor market and jobless claims data.
Purchase application data
Purchase application data was up 3% versus last week, making the year-to-date count 19 positive prints, 23 negative prints, and one flat week. If we start from Nov. 9, 2022, it’s been 26 positive prints versus 23 negative prints and one flat week. Now that we are past Nov. 9, 2023, we can retire this data, as this was the date I believed the housing market dynamics shifted last year.
The week ahead: It’s inflation week and housing starts
We will get CPI and PPI inflation data this week, and the core CPI data might be a bit more firm than some people want to see due to an uptick in medical services data. We will also have retail sales, which came in a big beat last month.
For housing, the builder’s confidence and housing starts are also on tap this week, so it should be a fun week! Another variable to deal with: Moody’s downgraded the U.S. debt to negative on Friday night so let’s see what reaction we get from that move on Monday. We might see some bond market volatility Monday morning from the downgrade, but this should be a short-term event.
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Property Chomp’s Take:
Hey there! Let’s talk about the latest housing inventory data. As we approach the end of the year, I was hoping for some growth in active inventory between 11,000 to 17,000. Unfortunately, even with mortgage rates reaching as high as 8%, we haven’t been able to hit that range. It doesn’t look too promising for me this year, especially with seasonality kicking in.
According to Altos Research, last year’s seasonal peak for housing inventory was on October 28th. It’s possible that we might have already reached the peak in inventory this week. Let’s take a look at some numbers:
– Weekly inventory change (Nov. 3 – Nov. 10): Inventory rose from 566,882 to 566,941.
– Same week last year (Nov. 4 – Nov. 11): Inventory fell from 575,798 to 572,347.
– The inventory bottom for 2022 was 240,194.
– The inventory peak for 2023 so far is 566,941.
– Just for context, active listings for this week in 2015 were 1,135,887.
One positive data point for inventory in 2023 is that new listing data has formed a bottom. Despite the increase in mortgage rates, we haven’t seen a brand-new low. I mentioned on CNBC seven weeks ago that we should be forming a bottom with some flat year-over-year growth prints in the second half of 2023. We’ve seen some good growth this week, and hopefully, in 2024, we can close the gap and get back to the new listings data from 2021-2022. It’s essential for new listing data to grow because most sellers are also buyers.
Now, let’s talk about price cuts. Traditionally, one-third of all homes take price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts can grow. Here’s an interesting stat for 2023: even with higher home prices and rates recently, we haven’t been able to catch up to the number of price cuts in 2022 when home prices were falling month to month.
Even as mortgage rates reached 8%, we have consistently been 4% below last year’s levels of price cuts. This explains why home prices fell last year, with crashing sales and a higher percentage of price cuts. This year, home sales have been falling more slowly, and we have fewer price cuts, resulting in firmer prices compared to 2022 levels.
Now, let’s shift our focus to mortgage rates and the 10-year yield. Mortgage rates started to fall on October 23rd, going from 8% to 7.38% by November 3rd. However, last week, mortgage rates rose towards 7.56%. One factor contributing to this increase was a lousy bond auction that sent the 10-year yield higher along with mortgage rates. The 10-year yield hit a low of 4.48% before rising by 18 basis points. Federal Reserve Chairman Powell’s presentation also led people to believe that his talking points were hawkish. However, the real issue this week was the bad bond auction.
Historically, once the Fed is done hiking rates, the bond market rallies, and mortgage rates head lower. So the question is, have mortgage rates peaked and will the next move be under 7% instead of over 8%? I believe this will be the case if economic and labor data softens, as the Fed has expressed concern about long-term rates being this high. However, it all comes down to the labor market and jobless claims data.
Moving on to purchase application data, it was up 3% compared to last week. Looking at the year-to-date count, we’ve had 19 positive prints, 23 negative prints, and one flat week. If we start from November 9th, 2022, we’ve had 26 positive prints versus 23 negative prints and one flat week. Now that we’re past November 9th, 2023, we can retire this data as it marked the date when I believed the housing market dynamics shifted last year.
Looking ahead to this week, we have some exciting things coming up. We’ll be getting CPI and PPI inflation data, with core CPI potentially showing some firmness due to an uptick in medical services data. We’ll also have retail sales, which had a big beat last month. Additionally, the builder’s confidence and housing starts are on tap, making it a fun week for the housing market. Keep in mind that Moody’s recently downgraded U.S. debt to negative, so there might be some bond market volatility on Monday.
That’s a wrap for this week’s housing inventory and mortgage rates update. Stay tuned for more updates as we navigate the ever-changing real estate market.
