Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Inventories Back to Pre-Boom Levels

The sharp increase in demand for housing has led to an equally strong decline in the inventory of homes for sale. Tight supplies have led to home price appreciation and pockets of new construction. Furthermore, with roughly 11 million homeowners underwater and builders still pensive, supplies are likely to remain tight in the near term.

Earlier this year, NAR Research began producing a statistical series for the seasonally adjusted months supply of housing units (condo and single family). Because this data series is seasonally adjusted, inventory figures for the middle of summer can be compared to other parts of the same year without concern of seasonal distortions. As can be seen by the chart above, the seasonally adjusted inventory peaked in October of 2007 at 3.83 million units after the market slowed in the face of mounting subprime foreclosures. Inventory then fell through the end of 2009 when the tax credit drew more sellers into the market. This pattern reversed though the fall of 2010 as demand fell and inventories climbed in the wake of the expired tax credit, but eased in 2011. Over the 12-month period ending in July of this year, inventories have fallen by 23% to 2.25 million units. At the current rate of seasonally adjusted home sales it would take 6.0 months to exhaust this inventory, down from 8.7 months in July of 2011. The last time inventories were this low was September of 2002.

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