Every month, NAR puts out the latest Existing-Home Sales numbers. One component of this data that often makes it into the news is inventory levels and months’ supply. These indicators are measures of housing supply. Here is a quick look at both of these terms.
Inventory indicates the number of properties marked as active on the market. When a seller lists a property, it becomes counted as inventory. Inventory is calculated monthly by taking a count of the number of active listings on the last day of the month. If inventory is rising, there is less pressure for home prices to increase.
In December 2019, inventory was at 1,400,000 active properties listed on the market. This is down 14.6% from November 2019. Compared with December of 2018, inventory levels were down 8.5%. This marks seven straight months of year-over-year declines and is a record-setting low since 1999.
Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly. In December 2019, the months’ supply was at 3 months, meaning at the current sales pace it would take just 3 months for housing inventory to be depleted. This is down from the 3.7-month figure recorded the month prior (November 2019), and December 2018.