Number of price cuts drops as housing inventory rises

Last week, housing inventory grew and the number of price cuts fell, which is expected at this time of the year. I hope the next thing we see is housing inventory grow at the level it typically does in January or February instead of being delayed until March or April. Last year at this time, inventory rose week to week and I was hopeful for a typical spring inventory year, but the seasonal bottom didn’t actually happen until April 14. So let’s hope for more home sellers in 2024.

Weekly housing inventory data

Here is a look at the first week of the year:

• Weekly inventory change (Jan. 5-12): Inventory rose from 499,143 to 505,223
• Same week last year (Jan. 6-13): Inventory rose from 471,349 to 473,406
• The inventory bottom for 2022 was 240,194
• The inventory peak for 2023 is 569,898
• For context, active listings for this week in 2015 were 931,002 

I don’t want to jinx this because active inventory rose last year at this time. In any case, we will keep an eye on housing inventory going out in the future. As you can see, we are still a bit away from my ultimate goal of having total active listings back to 2019 levels.

Price cut percentage

Every year, one third of all homes take a price cut before they sell — there is nothing abnormal about that. However, this data line accelerates when mortgage rates rise and demand gets hit harder. A perfect example was 2022: when housing inventory rose, the percentage of price cuts rose and home sales crashed. This is not what we’re seeing now. Sales aren’t growing much, but they’re not crashing as they did in 2022 so we track this data line religiously every week to get clues.

This is the price-cut percentage for the same week over the last few years:

• 2024 32.2%
• 2023 35.8%
• 2022 21.7%

New listing data

New listings data can grow in 2024, something I talked about on CNBC last year as this data line didn’t trend much lower when mortgage rates were heading toward 8%. We took an affordability hit after July of 2022 and since most sellers are also buyers, it was too expensive to move, or you couldn’t qualify to sell to buy another house, directly impacting housing inventory.

Every year, wages grow and home-price growth has significantly slowed since the madness after COVID-19. We can grow new listings from these depressed levels and get more demand. While this isn’t the Silver Tsunami some have promised, any growth back to 2021-2022 levels is a plus.

• 2024 39,640
• 2023 36,804
• 2022 37,091

Mortgage rates and the 10-year yield

The 10-year yield is the key for housing in 2024. In my 2024 forecast, I have the 10-year yield range between 3.21%-4.25%, with a critical line in the sand at 3.37%. If the economic data stays firm, we shouldn’t break below 3.21%, but if the labor data gets weaker, that line in the sand — which I call the Gandalf line, as in “you shall not pass” — will be tested. This 10-year yield range means…