Key facts
- US housing inventory increased slightly week-over-week in early August.
- Mortgage rates are near yearly highs, impacting housing demand.
- New home listings are declining seasonally.
- Price cut percentages are approaching last year's levels.
- Home price growth is minimal, with some forecasts predicting a slight annual decline.
- Pending home sales and purchase applications show year-over-year declines.
US housing inventory has seen a modest increase in recent weeks, reaching 871,063 units in early August, up from 865,709 the previous week. This growth occurs as mortgage rates approach yearly highs, a trend that typically softens housing demand when rates exceed 6.64%. Despite the current rate environment, inventory levels are closer to historical norms than the record lows observed during the COVID-19 pandemic.
New listings are currently in a seasonal decline as the market heads into fall and winter. While not yet at pre-2019 peak levels, new listings have reached the lower end of normal ranges seen between 2013-2019. Price reduction percentages are also nearing last year's figures, with 41.67% of homes seeing cuts in the past week compared to 42% the prior year. Home price growth has been minimal, with forecasts suggesting a potential slight annual decline, though current indexes show modest positive growth.
Mortgage rates have remained under 7%, largely due to mortgage spreads saving the day, preventing them from rising higher despite increases in the 10-year yield. The ongoing Iran conflict adds a layer of uncertainty to inflation outlooks, influencing bond traders. Pending home sales have shown a year-over-year decline, reflecting the impact of mortgage rates above 6.64%. Similarly, purchase application data, which looks 30-90 days ahead, has also experienced negative year-over-year prints, though the overall decline has been tempered by rates staying below 7%.