Summer is here, and the accommodation inventory is finally growing! Spring housing inventory was like a zombie rising from the grave, very slow, but summer is showing some hope and let’s hope it continues. Shopping apps had a slight week-over-week gain. Mortgage rates were again in a smaller range, hanging near 7%.
Thank you for reading this post, don't forget to subscribe!Here’s a recap of last week:
- active inventory increased 8,886 weekly. I am still expecting some weeks to show inventory growth between 11,000-16,000
- Mortgage rates remained in a narrow range in the middle 6.875%-6.95%
- Purchase application data revealed a 2% week by week development
weekly housing list
Active listings data saw a nice increase last week, less than I’d have wanted to see, but an increase nonetheless. I would feel much better about the inventory position if we added an additional 3,000-8,000 homes to the weekly data line from current levels. However, the real positive story here is that despite new listing data trending at all-time lows, we’re getting the growth in active listings that we traditionally see in the spring and summer.
- Weekly inventory change (June 16-23): Inventory increased 451,047 To 459,907
- Same week last year (June 17-24): Inventory increased 415,582 To 441,106
- Inventory was the bottom for 2022 240,194
- 2023 is the peak so far 472,680
- For reference, active lists for this week 2015 Were 1,179,728
As you can see in the chart below, inventory growth has been slow this year, and we will have negative year-over-weekly active inventory data very soon. But, last year saw the largest home sales decline ever in history, so the increase in inventory last year was due to an unusual occurrence and we were dealing with very short bars. So, it should come as no shock that we faced some negative year-over-year data just as housing demand stabilized.
In addition, new listing data turned negative year-on-year after the second half of 2022. Affordability being hit with higher mortgage rates impacted the new listing data as most sellers are buyers, thus the new listing data has featured the lowest level ever. Also, we must remember that even in 2021, when we had 3% Mortgage rates, new listing data were trending at all-time lows.
New listings data has had negative weekly data for three weeks in a row, no big deal of course, but we are starting to enter the seasonal downtrend of this data line. This will have to be the focus in the next four to six weeks. The data shows a significant year-on-year decline, and 2021/2022 was already in the works for an all-time low.
Compare new listing data this week to recent years:
- 2023: 63,106
- 2022: 84,014
- 2021: 76,761
Last week, NAR released the current home sales report, which showed a modest monthly increase in sales. More importantly, it showed that days in the market were down to teen levels again, which means we are once again in a very unhealthy housing market. Nothing good is happening in the housing sector while the number of sales days in the market are so short. In addition, NAR updated its inventory report showing a year-over-year decline in inventory.
NAR Total Inventory Level,
- is historically among the list 2-2.5 million
- The peak was a bit over in 2007 4 million
- right here we are 1.08 million
- Last year at this time it was 1.15 million
People often ask me why there is such a difference between NAR data vs. Altos Research inventory data. This link explains the difference and is worth a read.
10-Year Yield and Mortgage Rates
The bond and mortgage rate world has been quiet for the past two weeks. taking into account all the data and federal Reserve It’s surprising how stable the rates are in the conversations we’ve had recently. The 10-year yield was in a smaller range last week, and mortgage rates remained in the middle range 6.875%-6.95%.
In my 2023 forecast, I wrote that if the economy remains stable, the 10-year yield should be in the range between 3.21% And 4.25%Equal to mortgage rates between 5.75% And 7.25%, As long as the trend in jobless claims is down 323,000 At the four-week moving average, the labor market remains stable, meaning the economy remains healthy. Jobless claims have remained below this threshold for the year so far and job openings are still on the rise Hundred lakhs
I have also emphasized that the level between 10 years 3.37% And 3.42% Breaking down will be tough. i call it Gandalf’s Line in the Sand: ,You will not pass.” As you can see in the chart below, we tested this line several times, and yet the 10-year yield failed to pass. The system holds up. Unless the US dollar picks up or we get some market stress overseas, we should stay in the forecasted range.
The antidote to my 10-year yield limit would be if the economy here or around the world were to grow more rapidly; This would be a valid basis for deriving the above 10-year yield. 4.25%.
Issued in 2023 to exceed 10-year yield; The gap between 10-year yields and 30-year mortgage rates has worsened since the banking crisis began, and until the Fed screams uncle, it doesn’t look like we’ll see any further improvement.
Another aspect of my 2023 forecast is that if jobless claims break down 323,000 10-year yield could break below four-week moving average 3.21% move towards 2.73%. We didn’t have much activity on jobless claims last week, but we’ve seen the labor market loosen since its 2022 low.
From the St. Louis Fed: Initial claims for unemployment insurance benefits were little changed for the week ending June 17, which stood at 264,000. Four week moving average increased 255,750
buy app data
Purchase application data has surprised people with back-to-back positive prints in the last two weeks 8% And 2%, Which means year-to-date, we have 12 positive prints versus 11 negative prints. There is no clear direction on demand on week-to-week data. However, the fact that this is happening is a big deal, as you can see in the chart below. If this had not happened, we would all be having separate conversations today about the housing market and inventory.
Since November 9, 2022, we have 19 positive and 11 negative prints, indicating that demand has stabilized. Now that we’re nearing the 4th of July, you can clearly see it in the current home sales data, because shopping apps are a forward-looking indicator.
If we see more weakness in purchase application data, home sales this year could still remain below 4 million, but the decline in sales is much slower this year. This is important because the market is operating normally again with these low selling levels. This gives everyone a better perspective of where demand is going, because last year’s drop in waterfalls was a historic event.
The coming week: Housing data and PCE inflation
We’re going to have a big week in terms of data. S&P Corelogic Case Shiller home price index and FHFA The Home Price Index will come out this week and they will show strength in month-on-month price data compared to the second half of 2022. Plus, the new home sales report is coming, and we’ll see how much progress we’ve made.
The pending home sale will happen next week. I don’t expect much to happen there; In fact, we may have a negative report because we recently had four consecutive weeks of negative purchase application data.
In addition, PCE inflation data will be released on Friday – which is where the Fed wants inflation growth to ease back down to 2%. I know people like to focus on the CPI inflation data, but the PCE data matters more. Below is a look at core PCE data, which the Fed wants to see very little of.
So, we’ve had a busy week of data, and of course, we always keep an eye on the jobless claims data every Thursday. However, inflation data along with four housing reports and some Fed talk make for an exciting week for bond yields and mortgage rates. Besides, we never know what we’ll get from Russia, with or without love.
