The housing market is experiencing a notable shift as mortgage rates drop, leading to a decrease in housing inventory. This trend marks a significant change from the previous years when higher mortgage rates had created an inventory buffer.
Despite the recent decline in inventory, 2024 has been a positive year for the housing market. The inventory levels have moved away from historically depressed levels seen in 2020-2023. The weekly inventory change from August 23 to August 30 saw a slight drop from 704,744 to 704,335. In contrast, the same week last year saw an increase from 503,924 to 509,562. The all-time inventory bottom was recorded in 2022 at 240,497.
New listings are following their traditional seasonal decline. The number of new listings for the last week over the previous years are as follows:
2024 is now the second-lowest year for new listings ever recorded.
Typically, one-third of all homes take a price cut in an average year. However, rising mortgage rates in the past years have led to an increase in price cuts. This trend has slowed down with the recent drop in mortgage rates. The price-cut percentages for the last week over the previous years are:
The Altos Research weekly pending contract data shows no growth in week-to-week data, creating a more significant year-over-year gap. The pending sales data for the last week over the previous years are:
The 2024 forecast for mortgage rates ranges between 7.25% and 5.75%, with the 10-year yield between 4.25% and 3.21%. Despite recent economic data and a slight pivot by Jerome Powell, the famous 3.80% level has held. Mortgage spreads have improved compared to 2023, but are still not at average levels. If the worst levels of spreads from 2023 were incorporated today, mortgage rates would be 0.58% higher.
Purchase application data has shown a positive trend over the last 12 weeks, with seven positive prints versus five negative prints. Since mortgage rates started to fall in November 2023, the week-to-week data shows 19 positive prints, 18 negative prints, and two flat prints. The question remains whether rates can stay lower and continue to drop.
The upcoming jobs week is crucial as it precedes the September Federal Reserve meeting. Key economic data, including manufacturing data, bond auctions, and the Fed's beige book, will be released. For mortgage rates to go lower, weaker economic data, a more dovish Fed, and improved spreads are needed. The lowest mortgage range forecasted for 2024 is between 5.75% and 6.25%, and we are getting closer to that level.