Last week we witnessed a Santa Claus rally in mortgage rates, alongside improved housing demand. The economy continues to create jobs, with wages rising 4% annually. We also see growth in our ongoing contract data compared to 2022 and 2023. In addition, the purchase request data delivered another pleasant surprise with positive results.
As I’ve said for years, hitting the lowest home sales numbers ever makes it easier to see positive change. Let’s get into the holiday spirit with this week’s housing market tracker data!
Weekly ongoing sales
The weekly current contract data of Altos Research offers an insightful view of real-time housing demand. However, like most housing data, this information is quite seasonal. When mortgage rates began to fall in June, there was traditionally a lag between purchase applications and sales. But we have seen an improvement in our weekly pending contract data and even today, despite higher interest rates, the trend remains better than what we experienced in 2023 and most of 2024.
If mortgage rates could stay between 5.75% and 6.25% for a year, housing demand and sales would grow and catch most people by surprise because the bar is so low it would trip us all up.
These are the weekly open sales for the past week over the past years:
- 2024: 315,566
- 2023: 278,735
- 2022: 282,313
Buy application data
The recent purchase request data has surprised many people. For the first time this year, I saw an authentic shock on social media as purchase application data once again had a positive print, even with higher mortgage rates.
Is this the early seasonal demand surge we’re seeing now? More than 162 million people work there, so the size of our workforce alone may increase demand slightly due to seasonal pressure. Let’s see how the year ends, but since mortgage rates have risen, the numbers have been positive for the past eight weeks.
- 5 positive prints
- 3 negative prints
When mortgage rates rose earlier this year (between 6.75%-7.50%), the purchase application data looked like this:
- 14 negative prints
- 2 flat prints
- 2 positive prints
When mortgage rates started falling in mid-June, this is what it looked like:
- 12 positive prints
- 5 negative prints
- 1 flat print
Based on two years of data, we see a positive growth trend in purchase requests as mortgage rates approach 6%. This is why I’m now a little more leery of the seasonal increase in purchasing apps, as mortgage rates have risen from 6% to 7% in the past two months.
10-year interest rate and mortgage interest rate
My prediction for 2024 included:
- A mortgage interest rate range between 7.25%-5.75%
- A bandwidth for the ten-year interest rate between 4.25% and 3.21%
The ten-year yield ended the week at a low. Curiously, it wasn’t the weekly jobs data that roiled the bond market this week, but the ISM services index, which came out weak and sent bond yields down more aggressively.
We had a good week for mortgage rates, as Friday’s pricing was very good for a day when rates didn’t drop too much. As we have often discussed, it was positive for rates holding and reversing the key technical level around 4.40%-4.50%.
Mortgage spreads
The situation of mortgage spreads has improved a lot this year, especially compared to the difficult times in 2023. If we had had the worst levels of spreads in 2023, the housing market discussion would have been very different today, because mortgage rates the entire year would have been higher by about 0.60%. Last week, the 10-year yield was significantly affected by the ISM services report rather than by any employment report.
Spreads have not been favorable all week. However, on Friday we saw the 10-year yield fall, alongside greatly improved spreads, leading to better prices.
Weekly home inventory data
Housing inventory fell last week, which is typical for this time of year. The peak inventory in 2024 will be 739,434, which is not a normal inventory level, but it is good enough to make me feel much better about the housing market. Year-over-year inventory growth is the best housing story for 2024.
- Weekly Inventory Change (November 29 – December 6): Inventory decreased from 706,554 Unpleasant 690,015
- Same week last year (November 30-December 7): Stock fell from 555,717 Unpleasant 546,424
- The lowest inventory level of all time was in 2022 240,497
- The inventory peak for 2024 so far is 739,434
- For some context, the active listings for this week in 2015 were 1.050780
New offers
New listings data is experiencing the traditional seasonal decline, and the epic drop we saw last week was standard considering it was Thanksgiving. We can expect an uptick in data this week. New listings this year haven’t reached the numbers I had hoped; I came close, but it’s 5,000 less. Still, one of the best stories in 2024 was the growth we saw in new listings data.
New ad data from last week:
- 2024: 30,754
- 2023: 43,188
- 2022: 39.49
Price reduction percentage
In an average year, about a third of all homes experience price reductions, a normal phenomenon in the housing market. When mortgage rates rise, the percentage of homes that reduce their price increases significantly. Conversely, this trend decreases when interest rates fall and demand increases, as we have recently observed with falling interest rates.
But even with a high percentage of price cuts in 2024, national home prices didn’t fall, let alone crash. So aspiring housing analysts trying to use our data to suggest that home prices have fallen: we encourage you to do better in 2025.
Here are last week’s price reduction percentages compared to previous years:
- 2024: 38.4%
- 2023: 38.7%
- 2022: 42%
Next week: inflation week!
Next week is inflation week, with both the consumer price index (CPI) and the producer price index (PPI). The Federal Reserve will review these reports before their next meeting, which increasingly suggests a 0.25% rate cut, with a pause to wait for further data.
In addition, we will see the final version of this year’s Unit Labor Cost Wage Index, which the Fed is watching closely, as well as bond auctions. It will also be interesting to see if mortgage purchase applications continue their positive trend, as mortgage rates have fallen slightly over the past week, and what happens to housing demand.
