Are inventories even tighter than reported? Is more price pressure on the horizon for existing-homes in the months ahead?
Each month with the National Association of Realtors® Existing-Home Sales data release, we see information on home sales, prices, and inventories. There are two types of inventory measures included in the release:
1) the raw level of unsold homes on the market, and
2) the month’s supply—the level of unsold homes on the market relative to the current sales pace. 
July’s Existing-Home Sales data release showed that existing-home inventories were at 2.24 million and month’s supply was at 4.8 months. The raw number of unsold homes was down by just 10,000 from June to July, and month’s supply dropped slightly because of declining inventories and the fact that the sales pace quickened from June to July. From July one year ago, the change was even more dramatic. Raw inventory levels declined by 110,000, while the sales pace moved up from 5.07 million to 5.59 million. Month’s supply dropped from 5.6 months to 4.8 months.
The home sales figure is what we call a seasonally-adjusted annual rate. It’s adjusted so that we can easily compare July home sales with December home sales. The correction for the fact that many more homes are sold in the summer months when school is out and many fewer homes are sold during the cold winter holiday season has already been made. The headline inventory data, however, is not seasonally adjusted. In the chart below, the non-seasonally adjusted levels of both sales and inventories are depicted. The vertical grey lines mark each January, the typical slow month for sales and inventories.
 The months supply can be understood as the number of months it would take to exhaust the current inventory at the current sales pace. This measure assumes that all of the listings would eventually sell and no new listings would come on to the market.
We produce a less widely covered estimate of seasonally adjusted inventories. Shown in the graph below, you can see that this estimate does not show consistent dips each January. In the most recent data, seasonally adjusted inventory fell to 2.06 million unsold homes which is the lowest level since March 2014. In March 2014, however, homes were selling at a pace of 4.7 million homes per year. In July 2015, homes sold at a 5.59 million per year pace. This means that July 2015 seasonally adjusted months supply—pictured far below—was only 4.4 months compared to 5.3 months the last time inventory was this low.  We typically think of roughly 6 months supply as a balanced market.
 Seasonally adjusted inventories relative to seasonally adjusted sales
 In June 2015 existing-homes were sold at a 5.48 million annual pace while in July 2015 existing-homes sold at a pace consistent with 5.59 million homes sold per year.
 For more on seasonal adjustment, see this topic: http://economistsoutlook.blogs.realtor.org/tag/seasonality/