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Housing Inventory Growth Has Slowed in Recent Weeks
The next couple of months will be important for housing inventory. Will inventory follow the normal seasonal pattern and peak in the summer? Or will inventory peak later in the year (like October or November)?
My current outlook on house prices assumes that inventory will continue to increase into the Fall.
However, both Altos Research and Realtor.com are reporting that inventory growth has slowed. From Realtor.com: Weekly Housing Trends View — Data Week Ending July 30, 2022
Active inventory continued to grow, rising 30% above one year ago. The rate of improvement has stalled in recent weeks as the number of new listings dwindles …
Here is a graph of the year-over-year (YoY) change in inventory according to Realtor.com:
Inventory is up 30.4% YoY, but the “rate of improvement has stalled”.
And this morning Altos Research released inventory data as of August 5th. Inventory was at 544 thousand (7-day average); 24% above the peak in 2021 of 437 thousand on September 3, 2021.
Here is a graph of inventory from Altos. Inventory growth has slowed.
The third graph uses the Altos inventory data and shows the trend comparing to the same week in 2020 and 2019. The dotted red line is the recent trend compared to 2020 - and at the current pace, inventory will be up compared to 2020 in September. The dashed grey line is comparing to 2019, and based on the current trend, it is possible inventory will be back to 2019 levels in the first half of 2023. However, if inventory growth stalls, then it might take much longer to reach normal inventory levels.
Two years ago (in 2020) inventory was declining all year, so it is pretty clear that inventory will be up soon compared to 2020. However, for inventory to reach 2019 levels, inventory will have to increase into the Fall.
As an aside, the following graph from Altos shows the percentage of homes on the market with prices decreases. About 38% of homes on the market have had a price decrease (more than the peak in 2019), and this is probably a leading indicator of slowing price growth.
On inventory: The current situation is very different from the post-bubble period. Following the housing bubble, many homeowners were forced to sell because they had little or no equity in their homes, and loans that they could no longer afford when teaser rates expired. This led to a huge surge in inventory starting in late 2005.
Now most homeowners have substantial equity, and fixed rate loans with low interest rates. This suggests there will be little forced selling, even if prices decline in some areas.
Some people will always need to sell due to death, divorce, moving for work, etc., and some speculators might be forced to sell, but it is unlikely we will see a huge surge in inventory like in late-2005.
I’ve been expecting inventory to return to 2019 levels in early 2023 with low demand and some normal levels of new listings. However, it is possible that it might take much longer to return to more normal inventory levels - inventory will tell the tale!
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