Part 1: Current State of the Housing Market; Overview for mid-August

In this 2-part overview of the housing market for mid-August, I’ll discuss new and existing home inventory and sales, house prices, mortgage rates, rents and more.

New Listings Near Pandemic Low for July

Here is a graph of new listing from Realtor.com’s July 2023 Monthly Housing Market Trends Report showing new listings were down about 21% year-over-year in July. The year-over-year decline was slightly smaller in July than in June. From Realtor.com:

Seller listing activity remains muted as newly listed homes continued to decline in July compared to the previous year, by 20.8%. ... Potential home-sellers, locked-in to previously low rates and not yet confident that mortgage rates will decline, are continuing to sit on the sidelines, contributing to a renewed inventory crunch.

For the local markets I track that have reported so far, are show new listings were down more about the same in July as in June.

For these areas, new listings were down 31.2% YoY. … Last month, new listings in these markets were down 32.7% YoY.

Impact on Active Inventory

The following graph shows the seasonal pattern for active single-family inventory since 2015 from Altos Research. The red line is for 2023.  The black line is for 2019.

Inventory was down 10.3% compared to the same week in 2022, and down 49.3% compared to the same week in 2019.   It appears same week inventory will be below 2022 levels for the remainder of the year. It is possible that inventory will fall below the record lows in 2021 and early 2022 later this year or in early 2024, but currently that seems unlikely.

For new homes, there are 4 1/2 months of homes under construction (blue line below) - well above the normal level, but declining. This elevated level of homes under construction is due to supply chain constraints. There are 1.2 months of completed supply (red line). This is close to the normal level.

Interestingly, new home inventory is close to a record percentage of total inventory. This graph uses Not Seasonally Adjusted (NSA) existing home inventory from the National Association of Realtors® (NAR) and new home inventory from the Census Bureau (only completed and under construction inventory).

Note: Mark Fleming, Chief Economist at First American pointed this out in March.

It took a number of years following the housing bust for new home inventory to return to the pre-bubble percent of total inventory. Then, with the pandemic, existing home inventory collapsed and now the percent of new homes is close to 24% of total for sale inventory. The lack of existing home inventory, and few distressed sales, has been a positive for homebuilders.

And for housing starts there are a near record 1.682 million units under construction.

Red is single family units. Currently there are 695 thousand single family units (red) under construction (SA). Blue is for 2+ units. Currently there are 994 thousand multi-family units under construction.  This ties the record set in July 1973 of multi-family units being built for the baby-boom generation.

Combined, there are 1.682 million units under construction, just 28 thousand below the all-time record of 1.710 million set in October 2022.

Sales

The NAR reported sales were at a “seasonally adjusted annual rate of 4.16 million in June. Year-over-year, sales fell 18.9% (down from 5.13 million in June 2022).” This was in line with the local markets I track for June.

The early local market reports suggest a smaller year-over-year decline in closed sales NSA in July. Since sales were declining all year in 2022, so the YoY decline will shrink even if sales are flat in 2023.

It is possible that existing home sales, seasonally adjusted, bottomed in December and January. But a bottom in existing home sales doesn’t mean other measures are near a bottom. There are usually two bottoms for housing (see: Has Housing "Bottomed"?)

And the Census Bureau reported “Sales of new single‐family houses in June 2023 were at a seasonally adjusted annual rate of 697,000”, up 23.8% YoY from June 2022.

New home sales have likely bottomed and appear to be increasing (unlike existing home sales that is mostly flat at a low level). This is mostly because new home sales are holding up better than existing home sales due to the lack of existing home inventory.

New home sales are counted when contracts are signed, whereas existing home sales are counted when transactions close. So reported new home sales tend to lead existing home sales by a few months, and existing home sales won’t be up year-over-year until later this year.

In Part 2 early next week, I’ll discuss mortgage rates, house prices, rents and more.