Active vs Total Existing Home Inventory

Over a year ago, housing economist Tom Lawler noted the divergence in the change in total inventory vs the change in active inventory. He wrote:

As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months.

This is important since it is active inventory that is the available inventory for buyers. For July, the National Association of REALTORS® (NAR) reported inventory was unchanged year-over-year. However, other sources like Altos Research and Realtor.com reported active inventory was up close to 30% year-over-year in July. That is a significant difference!

Today, Sabrina Speianu and Danielle Hale at Realtor.com released their monthly report for August. This report has graphs for both total inventory and active inventory. On total inventory:

The total number of unsold homes nationwide—a metric that includes active listings and listings in various stages of the selling process that are not yet sold—was up 1.3% year-over-year. However, growth decelerated from last month’s 3.5% growth rate as the count of pending listings and newly listed homes fell further on a year-over-year basis.  

 And here is their data on active listings:

Nationally, the inventory of homes actively for sale on a typical day in August increased by 26.6% over the past year. … However, driven by a decline in seller sentiment, the inventory growth rate in August was lower than July’s historical growth rate of 30.7%, which was the largest increase in inventory in the data history. 

Note that active inventory is almost back to 2020 levels but is still far below the levels for previous years.

Realtor.com also released their weekly data today: Weekly Housing Trends View — Data Week Ending Aug 27, 2022

• Active inventory continued to grow, but the pace held at 26% above one year ago. The rate of improvement steadied this week as fewer homeowners decided to sell. …

• New listings–a measure of sellers putting homes up for sale–were again down 12% from one year ago. This week marks the eighth straight week of year over year declines in the number of new listings coming up for sale and a third consecutive week of double digit declines. Even though home prices are near record highs and home equity has soared, homeowners appear to be less eager to list homes for sale compared to last year.

Note that the sellers’ strike (fewer new listings) is ongoing, and the increase in active listings is mostly due to the sharp decline in demand.

Here is a graph of the year-over-year change in inventory according to realtor.com.

 Note the rapid increase in the YoY change earlier this year, from down 30% at the beginning of the year, to up 29% YoY at the beginning of July.

However, the Realtor.com data has been stuck at up around 26% to 30% YoY for 9 weeks in a row.

The bottom-line is active inventory is the key metric to follow.