Weekly active inventory growth still too slow

Weekly housing inventory data

Now that we are right in the middle of the spring buying season, my inventory model is simple: with higher mortgage rates, just like last year, we should be able to grow weekly active inventory between 11,000 – 17,000 on some weeks. Unfortunately, I batted a whopping zero last year since inventory growth never hit that level for even one week — even when mortgage rates hit 8%. This model was based on rates over 7.25%, which is my peak rate forecast.  

  • Weekly inventory change (March 22-29): Inventory rose from 512,759 to 517,355
  • The same week last year (March 23-30): Inventory fell from 413,883 to 410,734
  • The all-time inventory bottom was in 2022 at 240,194
  • The inventory peak for 2023 was 569,898
  • For some context, active listings for this week in 2015 were 1,012,704 

New listings data

While I am thrilled that new listings data is growing year over year, something I have been anticipating for some time, the growth in 2024 has been disappointing because I had expected a bit more by now. This was my big talking point on CNBC earlier in the year. Still, new listing data is a positive story. Here are the number of new listings for last week over the last several years: 

  • 2024: 59,854 
  • 2023: 48,442
  • 2022: 56,258

For context, new listings data at this time in 2010 ran at 326,266.

Price-cut percentage

Every year, one-third of all homes take a price cut before selling — this is regular housing activity and this data line is very seasonal. The price-cut percentage can grow when mortgage rates increase and demand gets hit. 

As inventory and demand grow year over year, the price-cut percentage data increases year over year. So, we will keep tracking this data line to see how high it goes this year. We keep it simple: higher inventory softness in demand means price growth is weakening. As we can see below, the year-over-year data is showing a higher percentage of price cuts.

  • 2024: 31.9%
  • 2023: 30.5%
  • 2022: 17.2%

10-year yield and mortgage rates

For those of you who have followed me for the last 12 months, you know how important the 4.34% level on the 10-year yield is for my economic work and therefore for the mortgage rate discussion. A break above this level would send mortgage rates toward 7.5%-8%. So far, so good here.

We had the PCE inflation report come out Friday and because some people were expecting a hotter number than estimates, it was perceived to be bullish for rate cuts. However, the markets were closed Friday, so we have to wait and see how trading goes on Monday. The 10-year yield channel is between 4.25%-3.80%, which looks correct as long as the economic data stays firm and jobless claims don’t break higher. This means mortgage rates will likely remain in the upper range of my 2024 forecast of 6.75%-7.25%.

There was not too much action in mortgage rates last week, but with jobs week coming up, we could see some movement. As you can see below, the 10-year yield has made a massive move from 2022 and has stayed above 4%, even with the progress we have made with inflation. Always remember, when it comes to discussions about rates and the Fed pivoting, it’s always labor over inflation data.

Purchase application data

Purchase application data didn’t move much last week. It was flat on a week-to-week basis and down 15% year over year.

Since November 2023, after making holiday adjustments, we have had 10 positive and six negative purchase application prints and one flat print. Year to date, we have had four positive prints versus six negative prints and one flat print.

What have 2022, 2023, and 2024 shown us? Purchase apps made a solid positive run up until mortgage rates started to get back over 7%. This was similar to 2023 data, when purchase apps had 12 weeks of a positive run-up until rates moved toward 7% and then 8%. 

Week ahead: We’ll see trading off the inflation report and it’s jobs week

First, the trading on Monday will be exciting because of the PCE inflation report; some argue it was hot and some say it wasn’t. The market decides this, and bond trading will judge it on Monday morning.

Also, Federal Reserve Chairman Powell talked on Friday. I believe Powell’s crucial comment was that the Fed won’t overreact to significant disinflation or heated inflation reports. I think some people missed this. If you want to understand why the markets still have three rate cuts priced in, it’s this mindset.

Then it’s jobs week, with four labor reports, and, of course, for me, it’s labor over inflation data, so buckle up!

Want more context? On the PowerHouse podcast with HousingWire CEO Clayton Collins, I discussed why the data lines we look at in the Housing Market Tracker are so critical for those in the housing industry.

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