The same trends in the housing market in recent weeks are still dominant this week. Mortgage rates continue to climb. It’s not uncommon to hear rates quoted over 8% for a 30-year fixed mortgage. Conventional homebuyers, particularly those who stretch to make a down payment and maximize their home for the payment, are in an increasingly tight bind.
To find out more of my weekly housing market insights backed by Altos Research data, watch the video above. Don’t have time? Here are a few key takeaways.
8% mortgage rates are a new reality
We’ve been talking about the impact of 8% mortgage rates for months. There are now 537,000 single-family homes on the market across the U.S. That’s up a fraction from last week.
Inventory continues to grow faster than last year at this time. And it hasn’t peaked for the year. Mortgage rates are also still climbing, with 8% common now, so homebuyers are priced out and homes sit longer.
Higher rates equal more inventory, and lower rates equal less inventory. The path to finally having more selection for homebuyers is through higher mortgage rates. If mortgage rates were to fall between now and January, expect to see inventory decline again next year like it did for most of this year. If rates stay at 8% or higher, expect to see inventory rise in 2024.
Fewer sellers see the upside of listing now
New listings volume each week remains very low, and there are very few sellers who want or need to sell into this market. And there is certainly no flood of sellers.
The data shows that 58,000 new single-family listings hit the market this week. That’s roughly the same pace as the last few weeks and the same pace as this time a year ago. This inventory build is from a dearth of buyers, not from a surge of sellers. Both homebuyers and home sellers are waiting on the sidelines.
There were actually more sales contracts started this week than a year ago. Sales have been consistently fewer all year long, but last October is when the brakes really slammed on. There are only 327,000 single-family homes under contract now. That’s shockingly few.
More listings are coming off market
One number that’s fascinating to watch is the proportion of listings withdrawn from the market versus those going under contract each week.
Withdrawals typically climb in the fourth quarter each year as we approach the holidays. Many of those homes will get relisted next year. What’s notable is that last October, the withdrawals happened at a much greater pace than they are now.
Last year, some sellers were still surprised at how quickly the market had changed; we saw only 52,000 new contracts with another 40,000 listings withdrawn. This year, we’re seeing slightly more sales and about 25% fewer withdrawals. Sellers are much more prepared emotionally for the down cycle this year.
Price reductions continue to beleaguer sellers
There are now 37.5% of the homes on the market that have taken home-price cuts recently from the original list price. And inventory isn’t done climbing for the year, so we can expect that price cuts will likely accelerate, especially if rates keep climbing.
When interest rates rose back in 2018, price reductions also climbed. But that was just a movement of just 100 basis points. Last year, rates spiked 450 basis points and price reductions spiked. This year is another big move. As a result, homebuyers hold back, sellers don’t get their offers, and price cuts ensue.