by Calculated Risk on 4/22/2008 12:12:00 PM

For more, see my earlier post: March Existing Home Sales

For forecasting, probably the most important number in the existing home sales report is inventory; houses listed for sale. This tells us nothing about the number of distressed homes for sale (REOs, short sales). It also doesn't tell us about homeowners waiting for a 'better market'.

But the NAR inventory report does provide a general idea of the supply side of the 'supply and demand' equation.

Click on graph for larger image.

This graph shows the inventory by month since 2002.

There are two key points: During the boom years (2002 through mid-way 2005), inventory levels stayed fairly steady. During the bust years, the inventory level has increased to a new record level for each month.

March 2008 was no exception. Even though inventories increased only slightly from February, inventory is at an all time record high for March.

Now that the Spring selling season has arrived, the question is: Will inventory levels keep setting new records, or will inventories hold steady (or even decline)? The next few months will tell us if inventory is stabilizing, or if, as I expect, existing home inventories will reach new record levels this summer.

Note: the NAR doesn't seasonally adjust inventory.