In 2024, housing inventory has reached new heights, creating a more favorable market landscape compared to the past few years. This increase has been attributed to higher mortgage rates, which have provided a buffer, ensuring a more robust inventory if the economy softens and rates decline.
Historically, with mortgage rates exceeding 7%, inventory levels were expected to rise between 11,000 and 17,000 units. This year, this projection has been met six times. However, recent declines in mortgage rates have led to a shortfall in meeting these targets. Last week marked the first minor drop in inventory on a week-to-week basis, coinciding with the holiday weekend.
Weekly Housing Inventory Update The latest weekly data shows a slight decrease in inventory, dropping from 704,744 to 704,335 units. In comparison, inventory rose from 503,924 to 509,562 units during the same week last year. The peak for 2024 inventory was reached last week at 704,744 units, a significant increase from the all-time low of 240,497 units in 2022. For context, inventory in 2015 was 1,204,810 units.
New Listings and Seasonal Trends New listings are currently experiencing their typical seasonal decline. This year, 2024 has recorded the second-lowest number of new listings historically, with 59,195 last week compared to 59,081 in 2023 and 62,775 in 2022.
Price-Cut Trends Price cuts have increased in recent years, with 39.3% of homes experiencing reductions last week. This trend has been exacerbated by rising mortgage rates, though recent data shows a slowdown in the pace of these cuts.
Pending Sales Analysis Pending sales data from Altos Research indicates a static week-to-week trend, with a growing gap compared to the previous year. In 2024, pending sales stand at 368,076, compared to 358,408 in 2023 and 404,076 in 2022. With mortgage rates rising in August of last year, comparisons may show some growth in the coming months.
Mortgage Rates and Economic Forecast The forecast for mortgage rates in 2024 ranges between 5.75% and 7.25%, with the 10-year yield expected to fluctuate between 3.21% and 4.25%. Despite recent economic data showing some volatility, including a negative job revision and a cautious pivot by Federal Reserve Chair Jerome Powell, the critical 3.80% yield level has held steady.
Mortgage Spreads and Purchase Applications Mortgage spreads, which were problematic in 2023 due to the banking crisis, have improved this year. Although still above average, the reduction in spreads has positively impacted mortgage rates. Purchase applications, which are seasonally weak post-May, have shown a positive trend over the past 12 weeks, with seven positive and five negative prints.
Looking Ahead: Jobs Week and Market Outlook The upcoming jobs report is crucial as it precedes the Federal Reserve’s September meeting. Economic data, including manufacturing reports and the Fed’s Beige Book, will be key in determining if mortgage rates can drop further. Current forecasts suggest that mortgage rates could approach the lower end of the predicted range if economic conditions and Fed policies align favorably.
Overall, while 2024 has brought an increase in housing inventory and some improvements in the market, the trajectory of mortgage rates and economic data will be pivotal in shaping the remainder of the year.
