US Housing Tracker_ Supply and Demand

Summary of US Housing Tracker - December 2024 Industry Overview - The report focuses on the US housing market, analyzing supply and demand dynamics, home prices, and sales trends. Key Points Home Prices - Year-over-year (YoY) home price growth has slowed for the seventh consecutive month, decreasing from 4.3% to 3.9% [9] - Total for-sale inventories have increased by 15% over the past 12 months, while total transaction volumes have decreased by 2% [9] Demand Dynamics - Mortgage rates remain approximately 50 basis points above their local lows from mid-September, but a decline in rates since Q4 2023 is evident in demand statistics [9] - Pending home sales have shown YoY gains for two consecutive months, a first since 2021 [9] - Mortgage applications for purchases have increased YoY in September, October, and November [9] - New home sales have decreased by 10% YoY, with year-to-date (YTD) volumes up only 2% through October [9] Supply Conditions - The inventory of homes available for sale is at its highest level since Q4 2020, with total months of inventory not seen this high since 2015 [9] - Single-unit housing starts are up 9% YTD, while 5+ unit starts are down 29% [9] - Units under construction have decreased over the past year for both single-unit (-4% YoY) and 5+ unit housing (-19% YoY) [9] 2025 Housing Outlook - Improving affordability and increasing inventories are expected to lift sales and single-unit housing starts in 2025 [9] - Home price appreciation (HPA) is projected to turn mildly negative in 2025 (-2% YoY) before reaccelerating to growth in 2026 (+3% YoY) [9] Affordability Trends - Current affordability improvements are noted to be among the best seen in the past 40 years, although challenges remain compared to historical standards [15] - The relationship between mortgage rates and sales volumes indicates a lag of 9-12 months for sales volumes to respond to significant changes in affordability [9] Inventory Insights - Existing inventory levels are no longer at historical lows but remain tight relative to historical averages [9] - The turnover in the US housing market is at its lowest levels in approximately 40 years [9] Market Sentiment - The report indicates a bifurcation in home price growth between new and existing homes, with new home prices declining while existing home prices continue to rise [9] - The deceleration in YoY HPA is gaining momentum, suggesting a potential shift in market dynamics [9] Statistical Highlights - Total for-sale inventory has increased for the 10th consecutive month, with a YoY change of 16% [40] - Months of supply have crept higher to 4.8 this month [40] - New home sales are projected to increase by 4% in 2024, reaching 695,000 units [12] Conclusion - The US housing market is experiencing a complex interplay of supply and demand factors, with signs of improving affordability and increasing inventories. However, challenges remain, particularly in the context of home price growth and overall market turnover. The outlook for 2025 suggests cautious optimism, with expectations for modest growth in sales and housing starts.