The defining characteristic of the 2023 housing market has been dramatically fewer home sellers than any recent year. That’s one reason total sales volume has been so low, but it looks now like that’s starting to change.
In this week’s Altos Research video, I look at how home sellers and sales are up, but that doesn’t mean prices will climb in 2024.
Watch the video or check out some key data takeaways from the data for the week ending Dec. 18.
The inventory picture
There are now 539,000 single-family homes on the market unsold, which is up 3.2% than last year at this time. Housing inventory climbed late in the year as mortgage rates rose. Rates are falling now and if that continues, buyers will jump and inventory will fall well into the first quarter of 2024.
Could we see new inventory from distressed sellers if we see a deep recession? Yes, demand will slow if unemployment climbs, but it’s probably 2025 before we see the bulk of that.
More home sellers enter the market
There were 11% more new sellers this week than last year at this time. All year there have been 10-20-30% fewer sellers, so the tide is starting to turn. These sellers have been matched by an increase in buyers, too, so there were 10% more immediate sales than last year.
As of now, there are no signs of increased sellers growing out of balance with the number of buyers. There are still far fewer sellers each week than in the pre-pandemic era.
Contracts growing
We continue to see the new contracts grow each week: There were 7.7% more new contracts started this week than the same week a year ago. The market was contracting all the way until October, but is now reliably expanding. This is growth of very low numbers: This isn’t a boom market, of course, but it’s a turn.
Home prices will finish the year up 2-3%
Home prices will finish 2023 with 2%-3% gains over last year. The median price of single-family homes in the U.S. is now $420,000. The leading indicators here show another year of flat home-price change in 2024.
The price reductions data tells us that while demand is still weak, it’s better than last year at this time. We had 37.6% of the homes on the market get a price cut this week, which is still above normal, but should drop into the normal range in January.
What will the housing market look like in 2024? If mortgage rates were to plummet early in the year, buyers would jump in quickly, inventory would drop and competition would push prices higher. That’s a big if. On the other hand, price reductions show enough weakness that if supply were to surge, prices would correct down very quickly. Supply isn’t surging, but it’s worth watching.
Mike Simonsen is the president and founder of Altos Research.
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