As I noted last year, Inventory will Tell the Tale about the housing market. And it is pretty clear that Housing Inventory Has Bottomed.
As the housing market starts to slow, we need to watch inventory very closely. This will give us a hint on what will happen with house prices.
And not just the monthly existing home sales report from the National Association of Realtors (NAR) and the monthly new home sales report from the Census Bureau. I also track inventory and sales for 35+ local markets each month. And I post weekly inventory data from Altos Research on calculatedriskblog.com.
Here are the inventory milestones I’m watching for:
The seasonal bottom (already happened)
Inventory up year-over-year (likely mid-year 2022)
Inventory up compared to two years ago (currently down 36%)
Inventory back to median for last decade (currently down 43%)
Realtor.com Weekly Inventory Data
Realtor.com has monthly and weekly data on the existing homes. Here is their most recent weekly report released yesterday: Weekly Housing Trends View — Data Week Ending April 23, 2022. They have data on list prices, new listing and more, but this focus is on inventory.
• Active inventory is down just 6 percent from a year ago.
The number of homes for sale is past this year’s seasonal low, which was also a record low, which means the number of homes for sale is climbing week to week and month to month as it typically does in spring. While the market has not yet caught up to last year’s level, this week marked a big jump forward. The gap between this year’s homes for sale and last year’s is one-fifth the size that it was at the beginning of the year. The catch up is likely to continue, as we noted last week, as new listings grow and home sales slow, and we expect active inventory to surpass year ago levels in the next few months. This growth will mean more options for shoppers than they’ve had in a while, even though inventory continues to lag pre-pandemic normal.
Here is a graph of the year-over-year change in inventory according to realtor.com. Note: I corrected a sign error in the data for Feb 26, 2022.
The previous week, inventory was down 12.6% YoY according to Realtor.com. That is close to the 11.2% that Altos reported for the same week. I expect Altos to report a single digit year-over-year decline in inventory on Monday.
Comparing Realtor.com Monthly data to the NAR
Here is a graph comparing the year-over-year change in the Realtor.com monthly data to the inventory data from the National Association of Realtors (NAR).
It appears the NAR includes some pending sales in their inventory data, and that accounts for the divergence in the year-over-year change over the last 2 years.
Housing economist Tom Lawler noted this in early 2021:
"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."
The divergence between the NAR and other measures will probably disappear as the housing market slows.
Here was the reported year-over-year change for March from several sources:
NAR: down 9.5%.
Realtor.com: down 18.9%
Altos Research: down 19.0% (week ending 3/25/2022)
Local market survey: down 20.7%.
The bottom line is inventory is key, and inventory is now increasing - and will be up year-over-year soon (but still be very low historically).