Each week — for several months now — inventory levels of unsold homes on the market has been expanding compared to last year. Even as inventory declined this week, it’s relatively growing compared to a year ago. This week, inventory fell by half a percent. A year ago it fell by 3% in the week.
New listings each week, which were record few last year, are growing now. There are still notably not a lot of sellers. But home sellers are gradually easing back into this housing market. Inventory this spring is looking much better for prospective homebuyers than any recent year.
Any time inventory rises, you start to see housing crash hyperbole on social media. And it’s important to keep watch on the demand side as well. We can see that homebuyer demand is also ticking up by most measures. There’s a lot to dive into here to see if we notice any signs of housing demand and supply getting out of balance. We’ll tackle some of that today.
New listings volume climbing
I want to start today with the new listings volume, which is notably finally climbing over last year’s anemic levels. There were 66,000 new listings this week, of which 14,000 are already in contract. That’s 14% more new listings than for the same week a year ago. Sellers are coming back to this housing market.
14,000 of those new listings are already in contract. That leaves 52,000 new listings unsold to add to inventory. That’s the most since 2020 — before the pandemic. In 2021 there were actually more total sellers, but at the peak of the frenzy, so many of those were immediate sales that they never get counted as active inventory. So the net result is that we can see sellers who sat on the sidelines a year ago, are starting to ease back in.
The takeaway here is: we can see new sellers, more than last year. It’s not a ton of sellers. But it is growing.
If sellers are growing we need to know if buyers are growing too. We wouldn’t want supply and demand to get out of balance. When we watch new listings build, a key factor I track is the immediate sales. These are listings that hit the housing market and take offers within hours or a few days and then go immediately into contract. They essentially bypass the active market. These immediate sales were the defining characteristic of the pandemic real estate boom. Those included bidding wars and multiple offers. There are still immediate sales which happen in every market. We want to know how many because it tells us about housing demand.
Of the 66,000 new listings this week, 14,000 of those are already in contract. That’s 6% more immediate sales than last year at this time. So immediate sales are growing just a bit.
We see more sellers entering the market, but that doesn’t mean inventory is jumping. In fact there are now 495,000 single family homes are on the market now. That’s half a percent fewer than last week. We have more buyers than sellers this time of year so the active inventory of unsold homes ticked down this week. The difference is that inventory ticked down half a percent. A year ago inventory fell by 3% in the same week. This is what I mean that home prices had more upward pressure a year ago.
Inventory declined this week but is now 12% more than last year at this time. While is it totally expected that we have more buyers than sellers in February, fewer homes on the market each week, that half a percent decline is pretty narrow. This implies that inventory will start growing week over week pretty soon. And the spring buying season will have improved selection for home buyers.
With more inventory and more sellers, comes the opportunity for more sales to happen. This week saw 61,000 new single family home sales transactions started. That’s 9% more than a week ago and 3% more than a year ago.
Last year was so restricted with so few home sellers that sales were ultra low. That is starting to change — at least the market is trying to — but 7% mortgage rates aren’t helping sales volumes. As I said, this week saw 3% more home sales transactions started than the same week a year ago. The last few weeks did not show any growth over the previous year. That’s discouraging because last year was so slow. But this week sales ticked up again, maybe people are coming out of their deep freeze. Unfortunately mortgage rates ticked up too and that held back some buyers for sure. So the sales rate growth is definitely weaker than the data was looking a month ago.
Median price of single family homes is $425,000 again this week. The price of the new listings is also unchanged at just under $400,000.
Homes are just a little more expensive now than last year at this time. Up until recently I’ve been expecting mostly positive pressure on home prices all year long. But we got hit by extra strong jobs news, which pushed the bond market higher and therefore mortgage rates jumped back to 7%. If that trend continues, that will keep home buyers at bay, and each buyer who doesn’t make an offer means slightly more downward pressure on home prices.
It can be hard to communicate all this with buyers and sellers. There are folks on the sidelines waiting for rates to drop so they can swoop in for sudden bargains. But they may not realize how much competition is waiting right along with them. Meanwhile, mortgage rates are actually rising.
Mike Simonsen is the president and founder of Altos Research.