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Housing Market Monitor: Inventories Fall Again


The housing market has been wild in recent years, making weekly data more critical. That’s why I created the Housing Market Tracker – a weekly analysis of buying apps, housing inventory and mortgage rates that will be released every Monday.

I want to focus on these three lines of data because they will give us a glimpse into the future, so we don’t have to wait for existing home sales data, which may be old if the market is turning. In a normal market, we wouldn’t have to worry so much about weekly data, but we don’t live in normal times.

Last year was the most chaotic real estate year I have ever seen: market dynamics changed at three different times and mortgage rates saw a historic move of 3.27% at a peak of 7.37%. Then those rates dropped 1.25%which changed the data of the request, to increase again in a short time.

Reviewing these three lines of data is important because:

Purchase application data is a demand trend that spans 30-90 days. This data had a historic year in 2022, with a cascading collapse that wiped out eight years of the index in one year. This trend survey index has been at the heart of housing economics for a decade and is sometimes a tricky data line if you don’t make a few adjustments.

the Search Violas weekly inventory data anticipates sales report inventory data. This can give us an idea of ​​the impact of forecast demand on inventory channels before the sales report arrives.

10-year yield shows where mortgage rates will go. Since 2015, when I started forecasting mortgage rates in my prediction articles, I always start talking about the direction I’m taking for the 10-year yield that year. You can see below that the relationship between the 10-year yield and mortgage rates has been strong since 1971.

For this weekly tracker, I’ll talk about weekly bond market movements and what may influence mortgage rates over the coming week, and what the previous week of mortgage rates did to the other lines of data we’re tracking. every week.

Buy app data

We didn’t have a purchase application report last week, as we will receive an updated report on Wednesday for the last two weeks. We had some interesting data after the weaker CPI report in November. For a few months, Buyer Demands data showed aggressive year-over-year declines, and weekly data showed no growth as mortgage rates rose aggressively.

The second half of 2022 was a difficult period for the housing market, until November. Once rates started falling and falling with some consistency, we had seven weeks of positive trending in the Buy Requests data.

This also means that sales made from these apps will not appear in November or even as part of the December Existing Home Sales report. However, looking at the existing home sales reports for January and February, which will be released in February and March, we should see the bleeding in existing home sales data stop.

The seasonality of shopping app data traditionally means that volumes increase after the second week of January until the first week of May. Traditionally after May, volumes drop, so discipline in reading the data in the first few months of the year is key.

Given that we were working from an extreme drop in shopping app data for most of the year in 2022, context will be crucial. However, what we have seen since November should be encouraging for the housing market. For now, just think about stabilization, working from a low bar, and we’ll take this data one week at a time in 2023.

Remember, we wiped out seven years of growth from this line of data in a single year in 2022; it was an epic dive into the data line.

Weekly housing inventory

The last few weeks have seen a noticeable decline in stocks. Most of this drop can be attributed to the seasonal drop we see every year, but some of it can be attributed to the increase in demand.

Let me connect the dots here: On Oct. 28, weekly data from Altos Research reported a spike in total single-family inventory of 577.172. Since last week, this inventory has dropped to 490,809. Traditionally, we see stocks fall during the fall and winter months. However, in the last two weeks of 2022, some decline may be related to the best demand we have seen since mid-November in the Buy Requests data.

We are now in 2023 and total inventory is low at all levels in the existing home sales market. On a historical basis using data from the National Association of Realtorstotal inventory has the ability over the next two existing home sales reports to break 1 million.

If this happens, it will only be the second time in recent history that we have started a calendar year below 1 million active registrations. Remember we have over 330 million people in America now and compare that to the active rosters we had in the 1980s with fewer people in the table below. Currently running from November report only, total inventory runs at 1.14 million and dropped for four months.

I’m not a big fan of total housing inventory being below 2019 levels nationally. Housing markets that are back to 2019 levels are great in my view, and as long as mortgage rates stay high, we don’t have to worry about prices rising out of control. So far so good, but it’s something I’ll be watching all year.

the 10-year yield and mortgage rates

Towards the end of the year, mortgage rates rose as the 10-year yield sold off and itself rose. Mortgage rates hit a high of 7.37% on October 20, then down to 6.12% December 15. They stood up for 6.54% to close the year.

This week we have a few labor market reports that could impact mortgage rates, in particular the job openings and Friday BLS employment report. However, for this weekly tracker, we will also be keeping tabs on the initial claims data released each Thursday morning.

I’ve been writing about the Fed’s pivot over the past few months, and it’s something I don’t believe we’ll see until the labor market breaks. That would mean initial claims would top 323,000 on the four-week rolling average. The recent headline was 225,000, and the 4-week moving average was 221,000.

Another line of labor market data to track is for continuing claims — people who applied for unemployment benefits and couldn’t find work after a week. This number has increased more steadily in recent times.

My 2023 forecast article will be published on Wednesday, and I’ll explain in more detail what I think about the bond market, inflation, and what to look for in 2023. However, for this weekly Housing Market article Tracker, the above three topics are what I will be focusing on throughout the year.

In summary, we don’t have Buyer Requests data to report from the past week, but trends have been positive and housing inventory has fallen amid falling mortgage rates. We will see if the recent rate hike puts an end to this series of positive data.

Now that the new year is here, it’s time to prepare for another year of weekly drama, and we’ll be focusing on the forward-looking data so you all have an idea of ​​what’s happening before the sales report is released. of existing houses.



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