As I noted last year, Inventory will Tell the Tale about the housing market. And inventory levels are now up year-over-year and increasing quickly.

As the housing market slows, we need to watch inventory very closely. This will give us a hint on what will happen with house prices.

And not just the monthly existing home sales report from the National Association of Realtors (NAR) and the monthly new home sales report from the Census Bureau. I also track inventory and sales for 35+ local markets each month. And every Monday, I post weekly inventory data from Altos Research on calculatedriskblog.com.

Realtor.com Weekly Inventory Data

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report released this morning from Chief Economist Danielle Hale: Weekly Housing Trends View — Data Week Ending May 21, 2022. Note: They have data on list prices, new listings and more, but this focus is on inventory.

• New listings–a measure of sellers putting homes up for sale–were up 6% above one year ago.  After several years of abnormal seasonality, it is heartening to see more new sellers in May, the period of the year where we tend to see the largest number of home sellers listing for the first time.  Seller confidence amid record high asking prices is driving the growth in the number of sellers this year over last which we’ve seen in 7 of the last 8 weeks. As we see more new sellers and overall inventory improves, tipping market conditions in a buyer friendly direction, this may somewhat surprisingly reinforce the trend and add even more sellers. Our research shows that nearly 3 in 4 home sellers this year is also planning to buy a home, so what’s good for the buyer is also, in many cases, good for the home seller.

• Active inventory continued to grow, rising 9% above one year ago. In a few short weeks, we’ve observed a significant turnaround in the number of homes available for sale, going from essentially flat two weeks ago, to +5% last week, to +9% this week. This is the biggest year over year gain ever observed in our weekly data history which goes back to 2017, and the first consecutive weeks of gains since 2019. This is a milestone to celebrate, but should be understood in context.  Our April Housing Trends Report showed that the active listings count remained 60 percent below its level right at the onset of the pandemic. This means that April’s buyers had just 2 homes to consider for every 5 homes that were available for sale just before the pandemic. May data in summary is likely to show that even as the market is adjusting rapidly, the number of homes for sale remains limited compared to pre-pandemic conditions.

Here is a graph of the year-over-year change in inventory according to realtor.com. Note: I corrected a sign error in the data for Feb 26, 2022.

Note the rapid increase in the YoY change, from down 30% at the beginning of the year, to up 9% YoY now. It will be important to watch if that trend continues. It appears that inventory growth is accelerating, as demand declines. (Earlier today, the NAR reported pending home sales were down 9.1% year-over-year in April.)

The previous week, inventory was down 5.0% YoY according to Realtor.com. That is somewhat lower than the 8.2% decline that Altos reported for the similar period. I expect Altos to report a larger year-over-year increase in inventory on Monday.

The bottom line is inventory is key, and inventory is now increasing year-over-year (but still very low). Inventory will be a key focus this year!