Hello! Welcome back to Flight School – Aerial View, where we take a quick look at the latest market updates.
Each week, we gather and summarize data from the leading analysts and economists in the real estate industry to provide you with a snapshot of what’s happening with four important topics: mortgage rates, inventory, demand, and pricing. Below are some key insights for the week of December 4th, 2023.
Starting with mortgage rates, which continued their downward trajectory this week as the 10-year Treasury yield dropped below 4.2% for the first time since September, according to new data from Freddie Mac. The 30-year fixed has averaged 7.03% for the week, according to Freddie Mac‘s Primary Mortgage Market Survey. That’s down significantly from last week’s 7.22%. In addition to the drop in rates, nearly all the leading analysts and economists are now subscribing to the idea that the Fed is done with this rate hike cycle and will forgo the .25 basis point hike they were previously expected to announce at their December meeting later this month. The next rate change we’ll be talking about is a cut!
Shifting to inventory, where the available single family homes on the market continues to fall for the second week in a row after rising unseasonably late into the year. This puts us on track to end 2023 with a few percent more homes on the market than last year. In terms of numbers, there are 556,000 homes on market, 2% fewer than last week, which is a normal adjustment post the Thanksgiving holiday. The fact that we will end the year with 4% more homes on the market than we started with is one of the leading indicators that we will see more sales in 2024.
That leads us to our third topic, demand, where the supply side of the supply-demand equation remains very constrained. What happens from this point forward is all going to be tied to mortgage rates. When mortgage rates are low, demand increases and the cost of holding a home decreases. That’s why when rates fall, inventory falls along with it. For buyers who are waiting and hoping for an overall affordability improvement as rates fall next year – the bad news is they are not alone and the competition from all the pent up demand is going to result in rising home prices.
Speaking of which, pricing, we remain on track to finish up for the year. Price cuts are now officially off their peak for the year and headed down as well. Currently 38.7% of homes on the market have taken a price cut. The fact that the market is still seeing more price cuts now than normal is a reflection of affordability. And while demand isn’t great, it isn’t deteriorating either and thus prices are holding firm. Price reductions are one of the best leading indicators we have in housing. When mortgage rates spike, demand cools. Fewer offers are made, and sellers are forced to cut prices. This happens immediately when the spike in rates happens. So in the price cut data we can quickly see where home sales will go in the future. Watching how steeply the price cuts fall over the next 8 weeks will tell us price performance six to twelve months out.
That’s it for this week, be sure to check in next week for another market snapshot! And as always, reach out now to learn even more about how Flyhomes can help you on your home buying and selling journey.