Based on the trends we can see after the start of the year, I’ll project 2024 will see about 15% home sales growth over 2023. Home prices will be up this year by a few percentage points, also.
These are very clear trends as we start the new year. 2022 started insanely strong and weakened rapidly in the second quarter. 2023 started with recovery, but slowed down in Q3 as mortgage rates hit 8%. But, 2024 is starting stronger than last year. And demand is increasing each week.
Could the housing market change and slow again in 2024? That’s certainly possible. But as of right now each week is showing increasing activity. The data does not show any slowing on any of the active market metrics.
- Home sales are increasing every week.
- Inventory is inching up.
- Home price signals are increasing too.
Sellers are coming back
There are 499,000 single-family homes unsold on the market now. That’s 2.75% fewer than last week, but 6% more than last year. Each week, inventory is increasing just a bit relative to last year. There are slightly more sellers each week.
Last year, was marked by how few sellers there were. It sure feels to me like that crazy restriction is easing a bit. We can expect to have more sellers all year. Unless rates dip into the 5s, then I expect demand will pick up so quickly that inventory will drop again. I’ve pointed out that consumers are more sensitive to changes in mortgage rates than to the absolute levels. Over the last 24 months we’ve had incredible volatility in mortgage rates. And if rates stabilize in the 6s and 7s this year, that will allow these trends we see now to continue.
Inventory growth is not spread across the country
Inventory is climbing in the south and central US. Texas, Florida, Arkansas, Louisiana up through Nebraska and Wisconsin have more homes available to buy than last year at this time. Unfortunately the Western and Northeast states have less available inventory than last year. Nevada, California, Arizona, New York & New Jersey. It’s going to be fascinating to see how this regional disparity plays out for the rest of the year.
I think it’s important to keep in mind that as inventory of homes to buy grows, so does the pace of sales. This really illustrates how we had a supply constrained year last year. Sales were held back for lack of sellers. There are now 247,000 single family homes in contract. That is 4.25% more homes in contract now than last year at this time. These are sales that are going to close in the next month or so. So the sales rate is already growing for 2024.
New contracts up
New contracts were 13% more than last year during the first week of January. This sales rate has been trending up very obviously. I am confident that we’ll see 15% more home sales in 2024 than we had last year. That’s a pretty healthy growth, but it’s easy from such low levels. Total sales pending is 4% more than last year the new pendings this week is 13% more. Home sales are growing.
Price reductions dropping
Meanwhile price reductions are dropping rapidly. Each week fewer home sellers need to drop their prices. Currently 32.8% of the homes on the market have taken a price cut. That’s 200 basis points fewer than last week. There are fewer price reductions because there is more fresh inventory and more of them are getting offers.
Small spike in new listings
After the first of the year we always see early price signals with the price of the cohort of new listings each week. Sellers have waited over the holidays and they start hitting the market right after new years. If they have buyers, the price of the new listings spikes up quickly. You can see it most dramatically two years ago, at the peak of the pandemic buying frenzy. The bright red line price of the new listings spiked up quickly after January 1.
This year we can see a little spike in the new listings price already to $409,000. Though I expect it to dip again next week before resuming a climb through May. What we’re looking for here is how quickly the price of the new listings rises in the next few weeks. It should tell us if we’re looking at a 0-3% home price increase for 2024 or maybe 3-5% increase.
Median price is strong
The median price of all the single-family homes in the U.S. is now $418,000. There is enough strength in the pricing signals that it looks like this spring we’ll pass the all time high from June two years ago. Like inventory the home price appreciation is 3-5% average across the country but it is not the same everywhere. Some markets are still down from the pandemic peaks and haven’t found the bottom yet.
Mike Simonsen is the president and founder of Altos Research.