Part 1: Current State of the Housing Market; Overview for mid-December
CALCULATEDRISK
By Bill McBride
In this 2-part overview of the housing market for mid-December, I’ll discuss new and existing home inventory and sales, house prices, mortgage rates, rents and more.
Year-over-year Decline in New Listings
Here is a graph of new listing from Realtor.com’s November 2023 Monthly Housing Market Trends Report showing new listings were up 7.5% year-over-year in October. New listings are now up year-over-year mostly because new listings collapsed in the 2nd half of 2022. From Realtor.com:
Providing a boost to overall inventory, sellers turned out in higher numbers this November as newly listed homes were 7.5% above last year’s levels. This marked the end to a 17-month streak of declining listing activity.
For the local markets I track that have reported so far, are also showing new listings up year-over-year in November.
And here is a table for new listings in November (some areas don’t report new listings). For these areas, new listings were up 3.3% YoY.
Last month, new listings in these markets were down 3.8% YoY. … New listings in most of these areas are down sharply compared to November 2019 activity, however, new listings are up in Jacksonville (N.E. Florida area) compared to 2019.
Impact on Active Inventory
The following graph shows the seasonal pattern for active single-family inventory since 2015 from Altos Research. The red line is for 2023. The black line is for 2019.
Inventory was up 1.9% compared to the same week in 2022 (last week it was up 1.0%), and down 34.1% compared to the same week in 2019 (last week down 34.9%).
Inventory is now solidly above the same week in 2020 levels (dark blue line).
For new homes, there are 4 1/2 months of homes under construction (blue line below) – well above the normal level but generally declining. This elevated level of homes under construction is due to supply chain constraints. There are 1.3 months of completed supply (red line). This is close to the normal level.
New home inventory is close to a record percentage of total inventory but is now declining as a percent of total for sale inventory.
This graph uses Not Seasonally Adjusted (NSA) existing home inventory from the National Association of Realtors® (NAR) and new home inventory from the Census Bureau (only completed and under construction inventory).
Note: Mark Fleming, Chief Economist at First American pointed this out in March.
It took a number of years following the housing bust for new home inventory to return to the pre-bubble percent of total inventory. Then, with the pandemic, existing home inventory collapsed and now the percent of new homes is 22.5% of the total for sale inventory. The lack of existing home inventory, and few distressed sales, has been a positive for homebuilders.
And for housing starts there are a nearrecord number of multi-family housing units under construction, and a near record 1.674 million total units under construction.
Red is single family units. Currently there are 669 thousand single family units (red) under construction (SA). This was down in October compared to September, and 162 thousand below the recent peak in May 2022. Blue is for 2+ units. Currently there are 1,005 thousand multi-family units under construction. This is slightly below the record set three months ago of 1,018 thousand.
Combined, there are 1.674 million units under construction, just 36 thousand below the all-time record of 1.710 million set a year ago in October 2022.
Sales
The NAR reported sales were at a “seasonally adjusted annual rate of 3.79 million in October. Year-over-year, sales tumbled 14.6% (down from 4.44 million in October 2022).” This was somewhat lower than the local markets I tracked for October.
This was a new cycle low for existing home sales.
Usually, house prices bottom after sales bottom, so a new cycle low for sales suggests likely further weakness for house prices in coming months. I’ll have more on this pattern.
And the Census Bureau reported “Sales of new single‐family houses in October 2023 were at a seasonally adjusted annual rate of 679,000”, up 17.7% YoY from October 2022.
New home sales bottomed in July 2022. New home sales are holding up better than existing home sales due to the lack of existing home inventory and the lack of distressed sales this cycle – and new home builders are using various tools to attract buyers such as 3-2-1 mortgage rate buydowns.
