Inventory of existing US homes background


24 Aug 2010.

The number most often discussed is total inventory, including single-family, townhomes, condominiums and co-ops. Total inventory numbers only go back to 1999, but are often extended using the earlier series on single-family-only, going back to 1982. Using the joint series, the all time record for inventory is above 13 months of supply.

Homes in foreclosure would not normally be listed, as the auctions take place outside the MLS listing. However most REOs are listed and included.

House prices and inventory are inversely related, with house prices normally rising when inventory, in months of supply, is below 6 months, and falling when above 6 months.

See also

Clippings below were used in the construction of this page

Note on timespan of record keeping

25 Sep 2007. NAR website.

“August Existing-Home Sales Fall on Temporary Mortgage Problems. contact Walt Molony.”

“Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Comparisons of current total month’s supply with single-family data prior to 1999 are broadly valid because single-family homes accounted for more than nine out of 10 purchases in the earlier timeframe (e.g., condos were 9.5 percent of transactions in 1998, 8.5 percent in 1990 and only 6.1 percent in 1982).”

Summer peak; REOs; all-time record

25 Aug 2008. Calculated Risk

“July Existing Home Sales: Record Inventory. by CalculatedRisk”

“Usually inventory peaks in mid-Summer, so this could be the peak for inventory this year (although it might happen in August or September). Most REOs (bank owned properties) are included in the inventory because they are listed - but not all. Some houses in the foreclosure process are listed as short sales - so those would be counted too. … 1982 (the all time record of 11.5 months of supply).”

Graph back to 1982 shows inventory has been above 13 months

26 Jan 2009. Northern Trust Daily Global Commentary.

“Existing Home Sales – Inventories Remain at Elevated Levels. Asha G. Bangalore”

[A graph shows that inventory went above 13 months worth of sales twice in the 1980s.]

The headline number is total inventory

25 Feb 2009. NAR press release.

“January Existing-Home Sales Fall, Inventory Down”

“Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 5.3 percent to a seasonally adjusted annual rate1 of 4.49 million units in January from a level of 4.74 million units in December, and are 8.6 percent lower the 4.91 million-unit pace in January 2008. … Total housing inventory at the end of January fell 2.7 percent to 3.60 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace.”

Inventory in months of supply is inversely correlated with prices

23 Jun 2010. Calculated Risk.

“Existing Homes: Months of Supply and House Prices. by CalculatedRisk”

“Earlier I mentioned that a normal housing market usually has under 6 months of supply. The current 8.3 months of supply is significantly above normal …

After the tax credit related activity ends, the months of supply will probably increase, and the ratio could be close to double digits later this year. That level of supply will put additional downward pressure on house prices.

This graph show months of supply and the annualized change in the Case-Shiller Composite 20 house price index (inverted).

Below 6 months of supply (blue line) house prices are typically rising (red line, inverted).

Above 6 months of supply house prices are usually falling (although there were many programs to support house prices over the last year).”