Purchase application data
When mortgage rates drop more than 1% in late 2022 and 2023, we see purchase application data continue to rebound higher, ultimately leading to monthly sales growth. Interest rates subsequently moved higher, pushing demand back to near the lows of this economic cycle. I wrote about that and the latest existing home sales report here .
With mortgage rates heading lower again and some labor force data at risk of further downside, now is the time to keep a close eye on how much demand will be generated if rates fall further over the next 6-12 months. Right now, we’ve just experienced several consecutive weeks of positive growth, and mortgage rates are still around 7%.
Since mortgage rates began to fall in November 2023, we have seen 14 positive photos, 13 negatives and Two flat prints in weekly data. However, as mortgage rates began to rise earlier this year, we observed a decline in demand. The data so far in 2024 is not promising; 8 positive photos, 13 negatives and two Flat print. This suggests that we are not experiencing a true surge in mortgage demand and that the volatility we are seeing in the data is simply a rebound from low levels.
10-Year Yield vs. Mortgage Rates
The 10-year Treasury yield is holding up well given last week’s weak economic data, with retail sales and housing starts at COVID-19 recession levels (which I wrote about here ). That means economic data would need to weaken further for the 10-year yield to fall below 4.20% and continue lower. Either way, mortgage rates haven’t changed much. The 10-year Treasury yield closed at 4.26% on Friday.
mortgage spread
The spread between 30-year mortgage rates and 10-year yields has been an issue since 2022, and it got worse after the March 2023 banking crisis. However, spreads have improved this year.
If we took the worst spread levels from 2023 and combined them to today, mortgage rates would be 0.47% higher. While our spreads are far from average, the improvement we’ve seen this year is a plus.
Weekly housing inventory data
This week inventory is at my target level again, four times what it was this year! My rule of thumb is that the inventory should have some positive print between weeks 11,000 and 17,000 As long as the interest rate is above 7.25%. Last week we saw stocks growing 13,593!
- Weekly inventory changes (June 14-June 21): Inventories rising 620,539 arrive 634,132
- In the same week last year (June 16-June 23), inventories rose to 451,808 arrive 460,668
- Historical inventory bottom occurs in 2022 240,497
- This week is peak 2024 inventories 634,132
- For some purposes, active listings this week in 2015 were 1,180,937
New listing data
Another positive for 2024 is the growth in new listings data, as the majority of sellers are buyers. While we’re not back to the trends that were common between 2013 and 2019, the fact that we’re growing is a plus. Now, context is crucial; new listings in 2023 are at an all-time low, and 2024 appears to be in second place. However, I will take this small victory.
The only problem with 2024 is that the growth rate is a little slower than I expected, and it doesn’t look like I’m going to hit the seasonal peak weekly minimum of 80,000 this year. Here are the new slates from last week over the past few years:
- 2024 71,678
- 2023: 62,374
- 2022: 83,347
Price reduction percentage
On average, one in three homes loses price every year—and that’s just traditional housing activity. When mortgage rates rise, demand falls and the price reduction percentage rises. When interest rates fall and demand improves, the price reduction percentage may decrease. The data line is seasonal, and since the end of March we’ve seen continued year-over-year growth in markdown percentage. That’s a lot different than what we’ll see in 2023, where even with mortgage rates approaching 8%, the price reduction percentage data is still negative year over year. Of course, last year we had less inventory.
A few weeks ago, I discussed on the HousingWire Daily podcast that price reduction numbers would cool down in the second half of the year.
- 2024: 37%
- 2023: 32%
- 2022: 29%
for sale
Below is our weekly open contract data to show immediate demand. Our demand has increased this year as more sellers become buyers. If mortgage rates continue to move lower, this contract number will grow. That’s why it’s critical to track 10-year yields, mortgage purchase apps and weekly pending contract data to get immediate leads on demand ahead of the existing home sales report.
- 2024: 396,153
- 2023: 385,699
- 2022: 449,777
The week ahead: Prices, home sales and Fed speeches
This week, we have some housing reports: new home sales, which are critical to the economic cycle; homes for sale; and two home price index reports. We have a lot of Fed presidents speaking out, and it will be increasingly interesting to see if there are any changes in their rhetoric.
The U.S. labor market is no longer tight, and even Federal Reserve Chairman Powell finally admitted that some labor data are back to pre-COVIDC-19 levels. To me, this sets the stage for some Fed members who don’t want to see a recession to sound more dovish if labor data worsens.
