Looking at the graphs below, you can see the housing market snapshot for the nation based on May 2022 data. I want to call out two specific charts that tell the “slowing market” story.
First, I want you to look closely at the Months Supply chart – it is up, up and away. From a low of below two months inventory to now a level of nearly six months. There is some seasonality that factors into this graph, you usually see more numbers come on the market once school lets out. While this is to be expected, why the steep curve upward?
That, dear reader, is because of the second graph, which is the total properties sold. This has been on a steady march downward. Part of the story earlier this year was, “there isn’t enough inventory,” which was true at the time. Buyer demand was through the roof (pun intended), but there just weren’t enough homes. There are still not enough for the current demand levels.
However, if you look at the charts since January, inventory levels are rising and total homes sold is still going down. Wait, what? Why?
Due to a series of reasons we’ve outlined in the past, the buyer is slowing down. This is a demand side issue, and some buyers have decided (or had this decided for them), that it was time to wait. Therefore, more properties entering the market and fewer buyers in the space to consume them puts upward pressure on inventory levels.
However, we’re not at a level yet where you will start to see downward pressure on home price. We’re seeing a steady march to a (more) normal market. There will be more normalized competition and the frenzied buyers market is a more comfortable one for them. It will be important to pay attention to these two trend lines over the next several months.