Don't Buy a House Yet: What the Housing Market Charts Actually Show

▶

I read one of the best-written housing market articles I've seen in a while, and it made the whole picture click in about five charts. So I walked through those charts on video, in four minutes, in plain English.

The short version: there are plenty of homes for sale, mortgage rates aren't historically terrible, and almost nobody is buying. That combination tells you something important, and it matters a lot if you're carrying debt and thinking about a mortgage on top of it. I'm not a financial advisor — this is for informational and educational purposes only.

What you'll learn

• What existing home sales from 2016 to 2024 actually look like on a chart
• Why a 6% 30-year fixed mortgage isn't the villain people think it is
• How months of supply collapsed during the pandemic and then recovered
• Why sales stay dead even with supply back and rates down
• The math on a $300,000 home becoming a $400,000 home
• Why I think we're in a bubble and what size correction I'm watching for

Home sales dropped like a brick

The first chart is existing home sales in millions, roughly 2016 through 2024. For most of that stretch the average runs around 5.5 million homes sold per year. Then the pandemic hits and sales spike. Then they drop like a brick. For the last two years, sales have been unbelievably low. That's the puzzle: why is almost nobody buying?

Mortgage rates aren't the problem

The second chart is the 30-year fixed rate from 2020 to now. Rates jumped to around seven, then up near eight, then came back down to around six. Here's the part people miss: if you pull up a much longer chart, 6% is historically a very good mortgage rate. So rates aren't great, but they aren't the reason sales are dead either.

Supply came all the way back

Months of supply tells you how many months of inventory sit on the market. More supply is better if you're the buyer trying to get a good price. The ten-year average sits around four to four and a quarter months. During the pandemic it collapsed to about a month and a half — and that's exactly why prices ran up. Simple supply and demand. Since 2022, supply has climbed back up, with dips along the way in 2023 and 2024, and we're now back near pre-pandemic highs.

There's another version of that chart where each line is a single year going back to 2017. Looking at August 2024, the red line shows more homes on the market than almost any August in nearly a decade — only 2018 was higher, and barely.

So why isn't anybody buying?

Lots of homes for sale. Decent mortgage rates. Almost no sales. The answer is in your face when you look at the price chart. From 2013 to 2020, median single-family home prices did the normal thing: up a little, retrace, up a little, retrace — a seasonal pattern. Then the pandemic hit and it took off like a rocket with no retracement. By 2022 the median was over $400,000, pulled back, hit it again, pulled back, and is now over it again.

Run that math. A $400,000 home was a $300,000 home three years earlier. That's a $100,000 gain on $300,000 — a 33% increase. That is not the normal pattern.

My take: this needs to correct

I'm in the camp that says we're in a real estate bubble and it will correct. To get back to the normal trend line that inflation and time would have produced, I think we need something like a 10%, 20%, 30% or larger correction in the current median home price. It'll be different in every local market. But the conclusion is the same: who cares what mortgage rate you get if you're significantly overpaying for the house?

Key steps

1. Look at existing home sales for your market, not just the headline rate.
2. Check where mortgage rates sit on a long chart, not a five-year one.
3. Check months of supply — more supply means more negotiating room for you.
4. Compare today's median price to the 2019 price and calculate the percentage jump.
5. Run the payment yourself in the mortgage calculator before you talk to anyone.
6. If the price looks stretched, put the money at your debt instead and revisit later.

FAQ

Is 6% a bad mortgage rate?

Not historically. On a long chart, 6% on a 30-year fixed is actually a very good rate. Rates aren't what's stopping buyers right now.

If there's plenty of supply, why aren't prices falling faster?

Supply is back to pre-pandemic highs and sales are still near record lows, which is an unusual standoff. Sellers haven't adjusted to the demand that's actually there. That gap is what a correction eventually closes.

What should I do while I wait?

Kill high-interest debt. A credit card balance is a guaranteed cost every month. Run yours through the credit card payoff calculator, then read price vs. interest rate for how I think about big purchases. If you want the full system, start with the get out of debt course.