445: Data Reveals Why the Housing Market is Robust | Mike Simonsen @AltosResearch

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It is my pleasure to welcome a returning guest back to the show and that is my friend Mike Simonson with Altos Research. He is the founder and he's a great data guy. Really does a great job at expressing the reality of the marketplace and I think you can be a little bit surprised at some of the things he has to share today. Mike, welcome back. How are you?

Thanks Jason. Great to be here.

Good, Good to be here as well. And I think it's been over a year. I can't believe how fast time flies. I could be wrong about that, but it's been too long. Anyway, Mike, so we're glad to see you again. What is happening in the real estate market? There's been a lot of turmoil since you were last on with the national association of Realtors and commission lawsuits and settlements and so forth. But just give us your take.

So this year it's now second quarter. It's the rolling into the peak buying and selling season. The biggest trends of the year are that we are finally seeing a little more inventory nationally than we saw last year. So we're seeing inventory grow, we're seeing new sellers each week grow about 5, 10, 15% more sellers each week than the same week a year ago. So that growth, and really what that growth means is that it allows for more sales to happen. And so in 2023, we had dramatically few sellers. That tight, tight inventory meant that any demand was gobbling up that supply. It actually pushed home prices higher in 2023. Um, but there was a lid on home sales that could happen because there simply weren't enough homes for sale. As mortgage rates stay higher for longer, that allows more inventory to build. It allows more, we can see more sellers coming, inching back into the market and therefore we can see more sales starting to happen. If mortgage rates jump, buyers stop really quickly. And so any growth in sales we are having right now are fragile. Like if rates jump from here, then our, our growth in sales rate is, is a little bit fragile. But if they stay flat about 7 or drift lower. That will be allow for home sales to grow this year. So they're about 7% more homes in contract right now than a year ago. And that could go higher from here, especially if rates start to ease down into the mid or lower sixes.

Okay. So sales volume has picked up a little bit. So the realtors are a lot happier with that. The title insurance people, the escrow companies, the settlement providers, the home warranty people, the lenders certainly are happy with that because there's more sales volume. And folks that contrary to what all the crash bros out there say, look, I mean, I guess you could express it this way, right? I've always said there are three types of markets. Most people think there are just two. There's a buyer's market and a seller's market. But I think there's a third one and it's called a broker's market. Okay. And to have a broker's market, you need inventory. And you know, this really occurred to me, Mike, about 20 years ago when one of my agents sent me this email. Her, her name is Marty, she's still working at my old company that I sold to Caldwell Banker. And I remember her sending me this email when inventory was very, very low. And she said, gosh, I just so wish interest rates would go up because then I'd have more inventory and I'd have more houses to sell. There's just nothing for sale. And you know, this was in Southern California, in Orange County, California, where I'm from. And you know, I just completely agree, you know, that's the, the thing. And so, you know, we've got what, 512,000 homes for sale in the US I believe was your last report. That's higher than the COVID era lows of about 240,000. But it's a far cry from normal, which we need to add about 700,000 more homes to be normal. Right, yeah, yeah, yeah.

So, and we can see a few things, Jason. We can see there are some parts of the country which are back to more normal times, like pre pandemic times. Some of the really it's around the Gulf, the Gulf states, so like western Florida, around through Louisiana and down into Texas, those markets have grown inventory more. And those tend to be like higher property tax markets, high insurance costs, high property taxes.

Yeah, that's for sure.

Yeah, yeah. And especially compared to California where our property taxes never go up. And so as a result, it's you, you hold real estate longer in California. And, and so we can see that, that turnover happening. And Driving inventory higher, especially those Gulf states. And then there's places like Boston and even San Francisco right now have very low inventory, barely coming off the pandemic lows. Inventory is growing pretty much everywhere across the country. Like growing over last year pretty much everywhere across the country.

Couple comments before you go on. Number one, I have long said, and I don't know if you agree with this or not, Mike, but if it wasn't for Howard Jarvis back in 1978 or something around there with.

California's property taxes, I mean, look, the prices are high, so the overall tax bill is very high, but the percentage is actually quite low. As long as you're not in any of these special assessment areas where there's mellow roos or whatever, you know, they got a million different names for these bonds. And you know, I think that has been one thing that has kind of allowed the California market to appreciate so well over the years is the fact that you have these very low property taxes and older people could afford to keep their houses, which artificially kept inventory low. Whereas in a place without Proposition 13 like they have in California would have caused people to sell as their taxes got reassessed every couple of years.

You know, that's exactly right. And that was the whole point of a Prop 13 in California is like, don't let granny get kicked out of her house.

Right.

And it works. The downside is that we give the advantage to granny over our kids.

Yeah.

You know, so there's chronically short inventory, chronic shortage of inventory in California and it pushes home prices higher. It's like, it's like doing rent control for the whole state, for the homeowners in the state. But we can see like Texas has high property taxes and adjust very quickly. So if you bought a house, your house in Austin appreciated a ton over the last five years, then your property taxes went up a ton too. And so you're much more likely to resell that than to hold onto it. And that turns out to make a healthier market for buying and selling a home in Texas. Keeps it more affordable, keeps more selection available. Yeah, yeah.

What it means right now churn right where you don't have this. And like you said, it's like rent control for the state. Because in rent controlled markets, like where you are in San Francisco, you know, people just don't move and move this really stagnant, weird market. It becomes very dysfunctional. You know, you have these. Same with New York City, you know, it's, it's.

Yeah. And that's what happens to California in the resale market. Right. And so you can see that it's why Texas has a much healthier, more affordable. It's one of the reasons that Texas has a healthier, more affordable. And it's ironic because it's like due to high taxes. But that's, that's how it works. Right, but what it means though is right now many of the Texas markets are now back at their pandemic, pre pandemic, normal levels of inventory. It means that, you know, you can see therefore less upward price appreciation, which in an affordability, like we have an affordability challenge right now. And so that means that that market becomes more accessible again to more buyers. And it's like, so, so those are underway right now in especially those Gulf states. But, but it's, but inventory is growing everywhere across the country right now.

Right, Right, right. Yeah. So it's growing a little bit. So, you know, I say that's a good thing. We need it to grow a little more, to get into more of a healthy market with some dynamism. It's been very closed down for so many years. Do you want to share some of your great visual aids with us?

Sure. We can dive in. We're looking at this week's data. So at Altos, we track every home for sale in the country every week. All the pricing, all the supply and demand, all the changes in that data, and then we publish out the data. So this is data including all last week published, this was through April 5th, and it actually includes the Easter weekend in there. So right now there's 513,000 single family homes on the market around the country. So it's 25%. It's 100,000 homes more for sale right now than a year ago.

And in, in this chart, each, each line is a year. And so the dark line there, 20, 24, you can see it's keeps expanding versus last year. And rates, mortgage rates are higher. That means more homes are lights. It's, you know, demand slows, inventory grows is a way to think about that. So, you know, as, as mortgage rates stay in the sevens, we see inventory growing. You can see though that there's four fears about whether there's too much inventory. Like, do we have a price crash coming? We can see, and I think you pointed this out early on, you know that the, the gray and green lines up there, that those are previous years. So there might be 800, 900,000 million homes on the market in the second quarter in not too long ago. And right now there's 513,000. So we don't really have, they don't see anywhere in the data like a flood of inventory. But, but as you point out, like more inventory, more supply is a good thing. More supply is very clearly leading to more sales. So more sellers means more sales happen. And so like all of those things are good for in general for the.

For the housing market and for the broader economy. I mean, look, when, when someone buys a house, they go and buy furniture, they go and buy appliances, they spend money at Home Depot and Lowe's. It is just a very stimulative thing. And this is why folks, the politicians will do anything in their power to keep the real estate market going. Okay. Because it's such a huge part of the economy. It just has such a ripple effect on so many different industries. So it's a, it's a very important part of the economy.

Yeah. And you know, we can see that in essentially all the laws, you know, are designed to help the homeowner. They're designed to make sure that, that you know, you get your tax breaks, you get like as everything we do, all the policy we do is about helping the homeowner. And so as a result, over time we own more homes. And over the years and you can see really 18, 19, and you can see how year over year fewer and fewer homes are been for sale over the last decade. And we're now coming out of that with, with higher mortgage rates for, for two years. We're two years into rising rates now.

Yeah. And, and it, isn't it amazing, Mike, that, I mean if you, you know, if you consider the highest rates went and the lowest rates out there that people still have. Right. The cost of money on this credit based asset, real estate has virtually tripled. Right. And there was no crash. Prices kept going up in the face of the cost of money tripling. Like think of the, what other asset could withstand that? That is a barrage. I mean that is, that's amazing that it has been this resilient. It really amazes me.

It amazes me too. You know, and, and if we look at this point, we take April of last year, April 2023, at that moment we were showing year over year home price declines. 4Q22, rates had jumped all year long and jumped even more in the fourth quarter and it really slowed the market down. And so By April of 23, we were showing home price declines versus the previous year. But what happened last year, which surprised me because there was so little new supply that the existing demand was There to essentially keep a floor on prices. So even though demand fell, supply fell dramatically. And, and that really kept a floor in prices. And we ended the year with about 5% home price appreciation last year in a year when, when demand was way down. And it was, it, it was really hard to, to bet on that a year ago. Right, it would have been really hard to bet on that a year ago. So that was a bit of a surprise that people like how all those pieces ended up working together.

Yeah, well, that's the lock in effect for you. It's just keeping people from selling. It's kind of like, it's kind of like we have tens of millions of people in America with Prop 13 rent control. You know, they don't want to give that up.

That's exactly what we have. And, and it is a generational benefit in that, you know, the people will have that like I have a 2.8% mortgage and I'm not selling that house. And now on the other hand, there are, have 5 million people a year who do buy houses.

Yep.

So now we have 10 million people who are not locked in. And that's one of the reasons that we will see more and more relisting inventory each year that we have higher rates.

Absolutely. Yeah. Yeah. So even in a low volume market where you're going to have maybe, you know, just under 4 million sales versus 5 or 6 million, which you'd want to have to be in a normal dynamic market. In that market though, you know, you do that for a couple of years and people start to peel off and then you reduce the lock in effect, which is a great thing because I'd like to see some more sales and some more inventory.

That's exactly right. And so we're two years into higher rates. And so we look at this chart here, inventory, see the single family homes on the market. And people ask me, when do we get back to the old normal levels? And the answer is like your, your agent who worked for you 20 years ago. The answer is when we have higher rates for longer. We have multiple years of higher rates each year. We're going to see inventory build and we'll build back closer to the old normal levels. And so it took us a decade to get down to the pandemic crisis lows. It takes us a few years to get back to the old normals. And so you can see the, the red lines there last year and the year before. You can see inventory starting, rates climb. So rates rise and inventory rises.

But again, overall, it's a Drop in the bucket.

So, yeah, yeah, it's slow. And on the other hand, you know, we have a lot of forecasters. Mortgage. I don't forecast mortgage rates, but there are mortgage rate forecasters who keep assuming that rates are going to fall this year.

Yeah.

And if they do fall, what's going to happen is we're actually going to, well, stimulate demand more than supply. So our inventory levels will start to fall again. So if your rates are about seven right now, 7% for a 30 year fixed mortgage, if they fall the six or into the six and a half or, you know, closer to six, like, you'll see this trend reverse and they'll start to compress again.

I completely agree, Mike. This is a little bit of research we did. We have an economist that works for us and I gave him this assignment of researching how many more people could qualify at different mortgage rates. And so what we did is I said, you know, just use a baseline of 7% mortgage. Right. Could be higher, lower, but we got to start somewhere. Right? So if you, if 7% is our baseline. Right. Our sort of benchmark rate, and we fall down by a half a point in mortgage rate reductions. Now, keep in mind, at the beginning of the year, Fannie Mae predicted by the end of this year we would see 5.6% mortgage rates. It doesn't look like that's going to happen, folks. I think they're going to revise that forecast. Maybe they already have and I haven't seen it, but Uncle Jerome Powell is being pretty tight with the purse strings on the rates, that's for sure. But you know, the pivot is going to occur. I think we all know that's coming. You know, it's just when is the question. So if rates drop a half a point, that means that 2.8 million more people can afford the median price home. Now, of course they won't all enter the market, right. But say a third of them enter the market and they start bidding and they start putting offers on houses and then there are multiple offers on houses. And so, you know, if you have what, seven, 800,000 people come into the market. In a market where you only have an inventory of just over 500,000 homes. Folks, this is just supply and demand. It's not complicated. Now, if rates go down to 6%, that means 5.4 million new people can qualify if they go way down to the. What's called the magic number by John Burns. Right. And I think you've talked about that, by the way, Mike. I don't know if he started with that. But that's the first one I saw, you know, mention the magic number. Barbara Corcoran's using that term now. That's 7.7 million new buyers. I mean, what do you make of this? This is crazy. In a market where we have 500,000 homes, or maybe by then we'll have 600,000. So what? It's. It's nothing compared to the demand. And, you know, I'm only just assuming maybe a third of these people actually enter the market. Your thoughts?

Yeah. So, you know, I think this highlights the message that I have been trying to communicate recently, which is that it's actually, I don't see it as a magic number. I don't see it as a fixed number, like 5 1/2 percent. For a while I was looking at that. We were coming out of the 20, 23, 22. We were watching. We could see where people would start to buy. We'd see where it was, slow down. What I've observed recently, and we can see it really clearly in the data, is that consumers are more sensitive to changes in rates than to the absolute levels.

Yeah, that's a good point. I expand.

So, yeah, so if I'm shopping at 7% and suddenly it's six and a half, it looks like a bargain.

Yeah.

If I'm shopping at seven and suddenly rates are at seven and a half, now I take a step back, I don't make an offer. I. We can see that then those sellers don't get their offers, that then inventory builds, then they do price reductions. Like, we can see it across the board pretty much to the day of the big mortgage rate spikes. And so, you know, I think about, like, we've been traveling now in 7%. We started the year in January, was in the sixes, but then rates pretty much climbed all year. They may be a little higher, early March, back down a little bit, but we're still in the sevens. So rates have essentially been climbing all year. And we can see that, like I mentioned, we're trying to sell. There's a little bit more sales happening. But you can also see how that is held back by. By rates having not receded. So now, though, they are flat at seven, and we can see the sales starting to build again. And once. If they, if they drop from here, then we'll see a big spike. And. But if they spike from here, then we'll see that slow down again. And so we can see it really directly correlated. So right now, because rates have been at 7, the magic number is 7. So they fall below 7. Like that stimulates demand.

In other words, it's all relative. Because the way the human mind works is by answering the question I ask all the time. Compared to what? Right. That's the way we all. The only way any of us know the value of anything, money, goods, a potential mate or a date is by comparing it to something else. Right. That's the only thing we do is we just were comparison beings. And that's why you saw all these people that have been around a while, as soon as the rates spiked, they said, well, when I bought a house, rates were 18%, you know, in the early 80s. Right. Or whatever. Right. But of course, houses were a lot cheaper. You didn't bother to mention that.

Yeah, yeah.

You know, but it, it's just all relative.

Sure, it is relative. And what really the lesson here is how quickly we reset our comparison. So, you know, rates have been at seven for a few months. We're comparing to seven and it's only a few months. Right. We're not comparing to five and a half. We're not comparing to three from two years ago. We're comparing to seven. And so if home buyers are, have been shopping this spring and they're looking around, they're setting their expectations about what kind of home they can buy based on 7% mortgage rates.

Yeah.

And so it's, it's only a few months of stability, that then they go, okay, but if rates jump to seven and a half, now they're frustrated.

Yeah.

Right. And, and, and suddenly six and a half looks like a bargain.

And by the way, I just want to say one thing about that, because a long time ago, I learned that when there's a little spike and when rates are volatile, it actually makes people fear loss. And they do move right away. Like they always think, okay, quick, there, there's a small number, there's like a window, like a window overall. No question. Okay. But like just when there's that slight bump, when they go to seven and a quarter, they get scared and they make a decision because they're fearful of loss. But then when it goes up too much, they just give up and resign themselves. So.

Yeah, yeah. And I, I think you could see that like a, like an, it's an accelerant for a little bit of time.

Yeah.

We could see that in the end of the first, like March, April, May, March and April of 22. Everybody knew rates were climbing.

Yeah.

That was the moment when the most people were buying. They were scrambling to get the last of the Deals in, and it was an accelerant. And then July 4th, weekend of 22, everything went off a cliff. Yeah, sellers stopped, buyers stopped. If you didn't have your house listed by June, you knew you missed the window. Like, all of it hit the brakes in the, in, like. And it was July 4th weekend and we're done. And so it was like an accelerant at first, but then it settles in. Yeah. You know, we've been talking about overall inventory, unsold homes on the market. The other way to think about supply is how many sellers each week, new listings each week are happening. And what we do, we tracked here is each line here is a year, and it's the squiggly lines, like some weeks more, some weeks fewer new listings. And the dark red line is this year we're recording this like the last weeks of data had, had Easter in it. And you can see there's a dip in the new listings there. 55, 000 new listings this week. But each week, all year long, the dark red lines higher than the, the light red, you can see growth in sellers all week long. And you can see it's starting to expand, which means, and I think this is also, like, we were just been talking about where now sellers understand the world we live in. Last year, they were just dramatic changes in mortgage rates and, and it's hard to make a decision. And now I'm more likely to be locked in. But, but now, once I've settled in, okay, we're two years into higher rates, I can start to make decisions. And so, okay, I'm going to sell my house. So we can see new listings starting to climb every week. About 10, 15% more sellers each week than a year prior. The other takeaway, when we look at the new listings volume is for the bearish argument. And the bearish argument is, you know, things are unaffordable and, you know, those investors or the Airbnb, you know, folks are going to start unloading their properties and we'd see a flood of, of new listings. And what, what.

Yeah, it hasn't happened is always wrong.

Right. But that's the fear. And what we can do is if, if that's your hypothesis, you can watch the new listings each week. And what we can see right now is, so there's 55,000, 60,000, 65,000 new listings in a given week. But normally this time of year, there might be 80,000. So you can see the gray lines here. Those are past years. So there might be 80, 90, 100,000 new listings in a given week in the second quarter. And if you think about that, if there's a hundred thousand new listings in a week and a hundred thousand sales, that leads to 5.2 million for the year. Like you could see how that it comes out. And so we have, we still have a very restrictive seller world, but it's starting to ease up.

You know, one of the things that I think you might have to start doing, and it's going to be a pain, is depending on how far you go back, adjust your data for inflation, essentially, and I don't mean money inflation, but the population is larger, there are more homes in existence in the housing stock. So to do this completely, right, you would have to take it on like a per capita type of concept. Right. Because if there were a hundred thousand new listings a week seven years ago, that is not equivalent to a hundred thousand listings per week today. And of course, there's much less than that today. There's only 55,000. 55,000. That's not that huge of a factor yet, but it's there. Right.

You know, and in fact, the per capita adjustment is something we've done and it's actually, rather than doing it time wise, it's a really interesting way to look at it. Compare markets. So when the bubble burst in 2008 and 2009, basically what happens is you have fewer homes per capita, more people competing for available inventory, prices are higher. Right. And if there's more inventory, per capita prices are lower and there's a nice linear relationship. So the tighter the market, the more expensive the homes it was. It's really clear. And then you'd get an outlier market in like 2008, you'd get like Vegas. They had way more homes per capita, and those were the markets that were poised to crash. And so you could use inventory per capita or people competing per home as a, as an indicator for likelihood of price adjustment. So right now you can look, for example, San Francisco or Boston, which have 7,8 million people in each metro, and there's like 1800 homes for sale in either of those markets for 8 million people.

Right? Nothing.

Yeah, nothing. You go to Sarasota, Florida, and it's like, I don't know, 2 million people and there's 5,000 homes for sale. And so you have a real clear picture of which markets are more likely to have price declines and in the coming year. And that per capita inventory is a really useful way to look at it.

Good point. I agree.

Yeah. So let's look at the sales rate So I mentioned that sales are expanding this year. There's about 7% more homes in contract than a year ago. So homes that are in contract now in April, they take taking about 38 days in contract right now. So that means they're going to close in April and Maybe there were 65,000 new contracts pending this week. So these are the homes that are on the market. They take offers and they go into contract. And so they're in, in that contract escrow phase for you know, 30 or 40 days. 65,000 new those this week including Easter weekend. So that'll jump next weekend and it'll bounce back up. And I'd love to see we might have over 70, 75,000 go into contract in the next, the week that we're recording right now, which would be a nice growth both week over week and versus last year. And what that tells us is that each week we're getting, we have more sellers and we have more sales taking place. And so this is just counting the new ones each week and we're looking at single family homes here. So you know you can see a few things that happen. The bulk of the sales happen April, May, June. Right second quarter the sales rate starts dropping off in the, in July and dips big on the July 4th holiday. And you can see then in the fourth quarter is the fewest home sales that we have in. What we're interested in here is I'm interested in watching the, the new pendings climb. The single family homes climb towards 80,000 is you get another 20,000 condos and 100,000 per week is that's over 5 million home sales in the year. Like that's a starting to get healthier home sales market. We can see the growth here. Interestingly there are other measures of home sales. For example, the Mortgage Bankers association has their index of applications for purchase mortgages and that one hasn't started really showing growth yet over last year. If your listeners pay attention to the MBA number they may say, well there's no home sales growth over last year yet and it's still record few. But what we are probably seeing is a shift to cash buyers. MM&NAR for example reported that there are more cash buyers than any time since 2014 when there were still a lot of like investors buying out distressed properties from the bubble burst. So a shift to cash buyers means the transactions are happening but it doesn't show up in the mortgage data yet because they're not doing mortgages. Yeah, that makes sense. Some of the Southern California markets are actually Significantly hotter right now. Right, I know, because they're more cashier dominated.

Yeah, right.

And so you could see that happening.

First of all, I want to just rewind a little bit here to what you were talking about, which is the number of sales and the number of pending sales, so closed versus pending, and then the number of new listings. It's totally okay if a lot of new inventory comes on the market as long as the buyer demand keeps up with that level of inventory. So Mike, you do a good job of speaking to that. I've seen you talk about it many times in the past. Can you just speak to it now?

So we had 55,000 new listings this week and we have 65,000 new contracts pending.

Okay, so the inventory is in a deficit.

It dropped this 1,000. Yeah. So inventory dropped this week. The available inventory dropped. We had more buyers than. Than sellers this week. So yes, you like, we can absolutely see that happening. We should expect that. You know, inventory, we want inventory to rise in the spring. We want more sellers to happen. You know, last year we had such a supply constrained market. In March of last year. If there's only 50,000 new listings in a week, it's hard to get 60 or 70,000 sales because the houses aren't there. And so we want that new listings volume to pick up a little bit. But again, like, we also want to make sure that the sales rate is picking up and because if it's going the other direction, that's a signal, you know, that we're getting supply and not demand. That has implications on thinking about prices in the future. And, you know, price is going to head up or down. Those are absolutely trends that we want to keep our eyes on.

You know, one thing to remember is from your good old accounting class in college, right, which is FIFO and lifo, right? First in, last out, last in, first out, you know, all of that stuff. And the point being that some of this housing inventory will never sell. There is a certain, you know, probably fairly small amount of the inventory, maybe less than 20%. That is just people like experimenting. They're just fooling around. They're overpriced, their houses are in such terrible condition, they're never going to sell. You know, there's always that element in every market because even during the COVID era when inventory was insanely constricted, there were still 240,000 homes for sale. Right. And so they're just, you know, there wasn't 1.2 million, like we need to be normal. But there's always, you Know, some. And we're not tracking the last in, first out, first in, last out concept here. We're just talking overall aggregate, you know.

Yeah, and, and you know, in the hot markets, some of those junkier properties, they get bought, right?

Yeah, I know they do.

Yeah. Right. Like that's what if you've got one of those, that's the time to sell it. Right. You know, one of those weird houses. Like it's time to sell it when it's hot. That's why inventory kept falling during the, during the pandemic, because we were buying everything in sight. So we're even buying the ones that weren't expecting to buy. And it's also why we could look at the average days on market and watch that thing. You know, normally it might be 70 or 80 days on the market and suddenly it's, you know, 20 days during the pandemic because even the houses that have been sitting around for 200 days are now sold. And so, yeah, those absolutely were, were trends to, to keep our eye on. And, and right now the, the, the junkier ones, you know, add to inventory. And so we are getting inventory growth when, when the market's significantly less hot.

Yeah, absolutely. Okay. What else do you want us to know, Mike?

So home prices. Median price of the homes that are going into contract right now, this is, the homes that people are buying is $395,000. It's actually 5.7% higher than last year. But what's interesting is only 2% higher than two years ago. And so it looks like we're going to get to just past the all time high. The may peak from two years ago in pricing this spring.

This is not adjusted for inflation. Right.

These are just nothing. This is not adjusted, it's not seasonally adjusted. We're just tracking like these are the homes. Those 65,000 homes were priced at $395,000. There are signals in the data that are less strong about future sales prices than we had a year ago. So looking at the asking prices are up 0% year over year. We track price reductions. So the percentage of homes on the market that have taken price cuts, there are more of those now than a year ago. So you can. So 32% of the homes on the market right now have had price cuts. Last year it was like 29% right now. So it's not catastrophically, it's normal to have about 30% of homes take a price cut before they sell. But it is notable that it's climbing now. It's notable that the April now is really the highest April we've seen in like a decade. So those are soft ish signals for future home sales. So houses on the market now, it doesn't get its offer, it cuts its price, you know, in April and maybe gets an offer in May, it closes in June. But you can see right now by tracking those, the price cuts data is not, not skyrocketing. Two years ago in April it was starting to skyrocket. We could see exactly what was happening.

So just a word here. Remember, we're talking about the entire country. We are talking about a giant geographically diverse country and we're talking about all price segments.

So that's right.

Multimillion dollar homes to the cheapest starter home or shack. Right?

Yeah. You can use as a rule of thumb about a third take a price cut. Some markets, you know, like Phoenix are typically more like 40% take a price cut. It's more common, there's more inventory, there's more investors. Things like that happen. Some of the, the chronic shortage California markets is more like 20 take a price cut but, but about a third. And so when more than that are taking a price cut like that's an indicator have weak demand and fewer. It's because there's hotter demand. And so right now we can see starting to climb and there are more on the market now with price cuts than any time in the last decade. So that's, it's soft. It's not super strong soft data.

Because, because, you know, this is a psychology of the seller that is the issue here. Right. If the seller's expectations are up in the clouds, it depends where you are in that cycle. Like. Or is the general mentality of sellers in a more realistic frame at certain times? Or is the general mentality like, oh, my neighbor's house sold, so mine's worth a hundred grand more. And you know, it's.

Yeah, well, you know, of those, that 30%, sometimes it's, it's a crazy seller, sometimes it's strategic, sometimes. Like there are different reasons that a house might be overpriced into a price cut. But about a third of them take a cut before they sell. In a hot market, it's fewer than that. The other thing we can see when we're looking at the sales prices here, the, the price of those contracts is in June and October, September of 22, we could see big steps down in prices. And those were the moments when interest rates jumped and consumers stepped back and we could see the immediate impact on sales prices. And it didn't make it into the headlines until six months later. So if rates were to jump right now, the price growth here can, you can see, could drop in a couple of weeks very quickly.

Right. Interesting. Okay, Mike, give out your website. You cater mostly to the real estate community of agents out there that need data for their clients and their sellers. It's always great to have you on. You're just a wealth of information. Go ahead and give out your website, if you would.

Yeah, we're altos research. Altos research.com and you know, if you need to understand the market and you need to communicate with buyers and sellers about what's happening in the housing market, go to Altos Research. You can book a free consult with our team and we can show you how to talk about the housing market with homebuyers and sellers right now with authority. With authority, with expertise.

Thanks always for joining us.

All right, Jason, thanks.

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