It’s been a week since the NAR agreement changes went into effect. Have the changes impacted the housing data we track each week? Since the buyer’s commission payout is no longer as transparent as it was before, I expected delays in the home buying process as people get used to the new rules.
The last time we saw this kind of effect was when mortgage lenders had to implement TRID in 2015 – it caused a month-long dip in existing home sales because it simply took a little longer to close a deal. The following month, those sales rebounded as everyone found a rhythm to how they did things. Let’s take a look to see if something similar happened in the first official week of data following the NAR billing changes.
Weekly data on housing stock
As mortgage rates have been declining recently, inventory growth has slowed and is now below my weekly target of 11k-17k. This is not surprising since I have been targeting the weekly average growth level with rates above 7%. My premise is that higher rates can lead to more inventory growth as they limit mortgage demand, so the slowing of the inventory growth rate seems normal to me. Nothing in this data so far seems to me to have been materially affected by the NAR billing changes. Last week, housing inventory grew by 6,271.
- Weekly inventory change (16-23 August): The inventory increased from 698,473 To 704,744
- In the same week last year (18-25 August): The stock rose from 497,361 To 503,924
- The all-time low in inventories was in 2022 at 240,497
- The annual inventory peak for 2024 is this week at 704,744
- For comparison: The active offers for this week in 2015 were 1,215,873
Data on new advertisements
New listings data is showing its traditional seasonal decline. 2024 is the second lowest year for new listings in history, but we still saw year-over-year growth, which is positive. Again, nothing unusual seems to me.
Here is the number of new additions last week over the past few years:
- 2024: 64,595
- 2023: 54,584
- 2022: 64,670
Discount percentage
In an average year, a third of all homes go down in price — this is normal activity in the housing market. Rising mortgage rates last year and this year have led to increasing price reductions, especially as inventory levels rise. This data line has slowed recently with falling rates, but we have seen some growth on a weekly basis.
In theory, if a seller doesn’t pay a buyer’s premium out of their sale proceeds, they are making their home more expensive for the buyer, who will have to bring more money to close. While we’re seeing some growth here on a weekly basis, the percentage discount data is inconclusive.
A few months ago, I talked on the HousingWire Daily Podcast about how price growth data would cool off in the second half of the year. Here are the percentage price reductions from last week compared to recent years:
- 2024: 39.9%
- 2023: 36%
- 2022: 39%
Weekly pending sales
Below is the Altos Research weekly data on outstanding contracts year-over-year to show real-time demand. We’ve seen some pick-up in demand here on a weekly basis, and the year-over-year growth is a little different than last week. Still, there’s nothing here that makes me think the law has changed anything yet.
- 2024: 368,363
- 2023: 361,337
- 2022: 405,363
In closing, I haven’t seen anything in the data above that suggests we’re already seeing an impact from the NAR billing changes. It’s only week one: I’ll be monitoring this for four weeks to see if, like with TRID, this impacts the monthly sales data, but nothing to date.
10-year yield and mortgage rates
My forecast for 2024 included:
- A range for mortgage interest rates between 7.25% and 5.75%
- The 10-year yield between 4.25%-3.21%
Despite a negative labor market revision and a “baby pivot” strategy from Jerome Powell last week, the famous 3.80% level that I’ve been discussing all year has held. That’s very impressive. And if the labor market and economic data weaken, yields and mortgage rates can fall.
Mortgage spreads
Mortgage spreads were a negative story in 2023 as the collapse of Silicon Valley Bank and the resulting banking crisis drove them to new cycle highs. We don’t have that variable this year and spreads have improved.
If we took the worst spreads from 2023 and included them today, mortgage rates would be 0.49% currently higher. Although we are far from average in terms of spreads, the fact that we have seen this improvement this year is a plus.
In my interviews with CNBC and Yahoo Finance on Friday, I discussed how future rate cuts and a more dovish stance from the Fed should lower spreads and bring rates down by 0.75% to 1%, returning them to more normal levels.
Purchase application data
Since mortgage rates have recently fallen by more than 1%, we will draw the line at this point and track purchase application data for the rest of the year. Over the last 11 weeks, purchase application data has been six positive against five negative prints. Last week saw a weekly decline of 5%.
Since mortgage rates began falling in November 2023, we have seen 18 positive prints, 18 negative prints, And two flat prints in the weekly data. However, when mortgage rates began to rise earlier this year, we saw a decline in demand.
The week ahead: housing reports and PCE inflation data
It will be a less dramatic week in terms of economic data, but we have a lot of housing reports, some home price reports, pending home sales and purchase applications. The Fed’s key inflation data – quarterly and monthly personal consumption expenditure reports – will be released this week. Fed Chairman Waller will also give a speech. I’m curious to see if the 3.80% level holds again this week.
