Tracking live weekly housing data would have been nearly impossible just a few years ago, but now we can gather and analyze real-time housing demand data. This valuable information can significantly enhance our understanding of housing economics and what is coming next. The question is: How can we harness the data to give you more confidence when talking about the housing market?
I have an approach here that I would like to share, which I use when publishing our weekly Housing Market Tracker.
Mortgage rates and purchase application data
One of the things I do weekly is track how forward-looking housing demand reacts to specific mortgage rates. Here’s an example of how purchase apps have acted with particular mortgage rate ranges.
When mortgage rates were running higher earlier in the year (between 6.75%-7.50%), this is what the purchase application data looked like:
- 14 negative prints
- 2 flat prints
- 2 positive prints
When mortgage rates started falling in mid-June from the yearly peak of 7.5% toward 6%, here’s what purchase applications looked like:
- 12 positive prints
- 5 negative prints
- 1 flat print
Mortgage rates jumped from 6% to 7% and are now down just a tad from the recent peak, and this is what the data looks like:
- 5 positive prints
- 4 negative prints
Purchase applications are tracked 30 to 90 days before they impact sales data. From the information above, we can observe that sales can increase when mortgage rates approach 6%. If rates drop below 6% and remain there for a year, we can expect significant sales growth since we are starting from a historically low baseline.
Purchase application data is at levels not seen since 1995, indicating a low-growth threshold. However, we now have a clearer understanding of where we can expect to see real improvements in these data lines.
Weekly pending contracts
Now that we see how sales can grow with mortgage demand and purchase applications, let’s look at how it tracks into our weekly pending contract data. This data shows homes going into contract, which may be reflected in the sales data in the following month or even two months later, depending on when the contract is signed.
We have observed that pending contracts improved when mortgage rates dropped to around 6%. Currently, the data shows better performance compared to 2022 and 2023, which suggests that we are establishing a firmer bottom in the data trend.
Our weekly tracker also provides an overview of our inventory data to add more context to what’s going on in the housing market. Since the lows of 2022, we have seen an increase in active inventory. This is precisely what the housing market needed as we have more choices for homebuyers and less price growth.
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Given the data above, it should not be surprising that the most recent existing home sales and pending home sales from the National Association of Realtors have improved. Here, we can see that pending home sales data has improved over the last two months.
I developed my data analysis to demonstrate how to identify trends early, allowing you to move beyond waiting for the existing home sales report. We can observe the demand curve in housing data months before its appearance in traditional data channels. That’s why we created the weekly tracker for you to review.
