There was a 4% decline in inventory last week compared to the week before. That’s a big change in one week. For 2023, will our inventory levels again be at all-time lows?
We typically see a decrease in housing inventory in December. However, we saw increased days on market and lingering inventory in the second half of 2022. We have witnessed a faster decline in inventory in the last four weeks, especially in this past week.
Purchase application data
The purchase application data reflects future demand, so even if the number of applications increases, it won’t show up until 30-90 days from now in the sales data. Our weekly tracking is necessary because of this.
There were seven weeks of positive data before these two weeks, corresponding to the drop in mortgage rates from 7.37% in November to 6.12%. In the past two weeks, however, purchase application data has been weaker due to rates rising to over 6.5% toward the end of the year.
Housing inventory each week
Inventory has decreased by 4% over the last few weeks, as noted above. It is likely that most of the decline is due to the seasonal decrease each year. Some of the inventory clearings may be due to better demand rather than seasonal declines, if the purchase application data improved toward the end of the year.
Mortgage rates and 10-year yields
Mortgage rates fell to 6.20% after the solid jobs report pushed the 10-year yield lower. When wage growth cools down, the bond market expects the rate-hike cycle to end because headline inflation is dropping and wage increases are falling.
In summary, inventories are declining as they usually do during this time of year. However, some of that inventory may be attributed to lower mortgage rates currently driving better demand. If the spring seasonal increase doesn’t happen this year, the housing market faces a double net negative.