by Calculated Risk on 9/23/2024 11:01:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Watch Months-of-Supply!

A brief excerpt:

Both inventory and sales are well below pre-pandemic levels, and I think we need to keep an eye on months-of-supply to forecast price changes. Historically nominal prices declined when months-of-supply approached 6 months - and that is unlikely any time soon - however, as expected, months-of-supply is back to 2019 levels.

Months-of-supply was at 4.2 months in August compared to 4.0 months in August 2019. Even though inventory has declined significantly compared to 2019, sales have fallen even more - pushing up months-of-supply.

The following graph shows months-of-supply since 2017. Note that months-of-supply is higher than the last 3 years (2021 - 2023), and above August 2019. Months-of-supply was at 4.2 in August 2017 and 4.3 in August 2018. In 2020 (black), months-of-supply increased at the beginning of the pandemic and then declined sharply.
...
What would it take to get months-of-supply above 5 months? If sales stay depressed at 2023 and 2024 levels, how much would inventory have to increase to put months-of-supply at 5 months by, say, June 2024?

There is much more in the article.