Inventory slightly decreased
There are currently 651,000 single-family homes on the market nationwide. That's just a few percent lower than a week ago. Inventory is 38.5% higher than a year ago. Still, there are 32% fewer unsold homes currently on the market than in 2019. Inventory is increasing in every state in the country. But most parts of the U.S. still have fewer homes for sale now than they did before the pandemic. Only four states — Florida, Texas, Oklahoma, Arkansas and Idaho — have more homes on the market now than they did at pre-pandemic levels in 2019.
The pattern to watch later this year will be whether inventories continue to grow as they did late last year or plateau as they do in a normal summer season.
New listings also declining
There was a long holiday weekend last week, so new listings are obviously down. Only 57,000 new single-family home listings this week did not sell, and another 11,000 were sold instantly. This is a small percentage of new listings that received offers and quickly went under contract. We like this “instant sales” number as a measure of the organic level of demand. The more people who wait to buy the right property, the more people will jump on a deal when they find one. Only 16% of listings were sold instantly this week. This is very low and down from May. The total of 68,000 new listings represents 6% fewer sellers than last year.
These numbers will recover next week as sellers appear to be pulling back now, which will continue to suppress inventory growth for the rest of the year.
The number of new pending cases has decreased due to the holiday.
Sales are also down over the holiday weekend, with 58,000 new contracts signed this week, roughly the same level as the past two holiday periods.
There are currently 382,000 total single-family homes under contract, unchanged from last week and only 1% higher than a year ago. No sales growth.
What I'm looking at in the hold data is that if interest rates fall over the remainder of July and August, for example, new holds should increase from 65,000 per week to about 70,000 per week. If mortgage rates fall below 6.75 and stay there, sales should increase slightly, perhaps 8%.
Prices have dropped slightly
The median price for all homes is currently $450,000, down 1% from last week and unchanged from a year ago.
The average price of new listings this week is $404,900. That's a big drop for the week, but again, that's down to the holidays. By this measure, tracking all new listings in a given week, prices were 1% lower than the same week a year ago.
This is the first negative reading for new home prices in over a year. It's only been a week, and it's a holiday week, so prices will likely spike next week. It's notable that this frenzy hasn't reversed course; new home prices are about 3% higher than they were a year ago. As the year has progressed, rising mortgage rates have dampened demand and compressed prices. The single negative reading is part of that compression.
This week the median price of new pending contracts is $393,000 nationwide. This is a 1.5% drop this week. Prices always drop a bit after the holidays. These pending contracts are a proxy for what is for sale. These are homes that have not yet sold, but have begun the sales process this week. These prices are 3.1% higher than they were a year ago. As with the offers side, the gap is narrowing. For most of the year it was in the 4-5% range year over year. Over the next few months, home prices will generally decline as we move past peak buying season. We will continue to keep an eye on this narrowing as well. We expect this narrowing to continue and be in the 0-3% range by the end of the year.
I don't know how quickly spreads will widen again once demand recovers after the peak in mortgage rates, but that's a possible outcome and we'll be keeping an eye on it.
Price cuts slowing
This leading indicator of price reductions is one of the reasons I continue to expect home price growth to slow: Approximately 38.3% of homes for sale nationwide are being priced down from their original list price, a higher reduction than any of the recent price reductions seen in July.
Again, many of the subtle movements reflect consumer reactions to changes in mortgage rates. With any luck, mortgage rates will ease for the rest of the year, and one measure of recovering demand will be fewer price cuts. When you put a home on the market and no buyers are willing, you lower the price. But once a few buyers start showing up with newly affordable mortgages, this statistic will plateau and then decline.
Mortgage rates have risen sharply twice, in September 2022 and September 2023, causing homebuyers to hold off on purchasing homes. These two sharp price declines occurred almost simultaneously on the same day that mortgage rates rose sharply.
Mortgage rates have remained high this year for longer than anyone expected, and it's not clear we're out of the woods yet. But maybe we are.
Mike Simonsen is the founder of Altos Research.