Watch Months-of-Supply!

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 above 2019 levels.

Months-of-supply was at 4.3 months in September compared to 4.0 months in September 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 5 years (2019 - 2023), and just below the level in September 2018. Months-of-supply was at 4.2 in September 2017 and 4.4 in September 2018. In 2020 (black), months-of-supply increased at the beginning of the pandemic and then declined sharply.

There is much more in the article.