If we were to take the worst of the 2023 spreads today, mortgage rates would now be 0.48% higher. While spreads are far from average, it is positive to see such improvements this year.
10-year government bond yield and mortgage interest rates
Last week, inflation data and testimony from Federal Reserve Chairman Jerome Powell were positive for mortgage rates, pushing the 10-year Treasury yield down to a crisis level of 4.20%. This level is difficult to come down from, so the key this week will be whether bond buying continues after it falls below 4.20%. If this does not happen soon, we will need to wait for more economic data and Fed comments to push the 10-year Treasury yield down.
Purchase requisition data
The last time Purchasing Apps growth trended positively over a 12-week period was when mortgage rates hit 6%. Purchasing Apps have been positive for 4 of the last 5 weeks, yet mortgage rates haven't even hit 6%. Context matters because we're currently operating at an all-time low, so as the last 5 weeks have shown, it won't take much to move the needle upwards in Purchasing Apps.
But keep an eye on this story over the next six months as data for the second half of 2022 and 2023 shows. If mortgage rates come down and we get at least 2-3 months of positive data, that will be reflected in future existing home sales reports. Remember, the buying app looks 30-90 days out, so that data will be reflected in the sales reports later.
Since mortgage rates began to fall in November 2023, the weekly data has shown 16 positive, 14 negative and 2 flat readings. However, as mortgage rates began to rise earlier this year, we saw a decline in demand. Year-to-date data for 2024 remains unfavorable with 10 positive, 14 negative and 2 flat readings.
Weekly Housing Inventory Data
This week's data is impacted by the 4th of July, as people tend to take longer vacations, especially if the 4th of July falls on a Thursday or Friday. So, while we can't say anything about a week-over-week decline in inventory, it is impacted by the holiday and should trend back up next week.
Weekly inventory change (July 5-12): Inventory decreased from 652,573 to 651,453. Same week last year (July 7-14): Inventory increased from 466,534 to 471,603. The all-time low for inventory was 240,497 in 2022. The peak of annual inventory for 2024 was 652,573. For reference, active listings during this week in 2015 were 1,197,439.
Newly listed data
New listings data was down more than expected this week, but since it was the 4th of July weekend, I'm not too concerned about it. I'll be keeping an eye on it over the next few weeks, though. We're about to enter the seasonal decline period, so we should get used to seeing a decline in new listings data as we get closer to the end of the year.
It's a bit shocking to me that there are fewer new listings this week than there were last year. This is the lowest number of new listings this week on record. Here are the number of new listings this week over the past few years:
2024: 56,638 2023: 57,304 2022: 71,790
Price reduction rate
Typically, one-third of all homes are discounted in a typical year, a typical housing transaction, and with interest rates remaining high, price cuts are higher than they have been in the past two years, and inventory data in some parts of the U.S. is higher than the national data.
A few weeks ago on the HousingWire Daily podcast, we argued that price growth data would level off later this year. Here are the percentage price declines over the last few years:
2024: 38% 2023: 33% 2022: 33%
Pending Sale
Below is Altos Research's weekly Pending Contracts data (YoY) showing real-time demand. Demand has increased slightly this year as more sellers are buyers. These are live weekly contracts compared to purchase requisition data which covers 30-90 days. Also, the weekly Pending Sales data includes contracts.
2024: 419,576 2023: 377,650 2022: 419,524
Coming up this week: Powell speaks again, retail sales and housing starts on the table
Chairman Powell speaks again on Monday, and several other Fed presidents will be speaking this week. It will be interesting to see if we hear more dovish comments from other Fed presidents this week. Retail sales are out on Tuesday, and housing starts on Wednesday. The big focus on housing starts data will be whether single-family home permits continue to decline, which is not bullish for an exodus of construction workers. Also on Thursday is the all-important unemployment claims data.