Is the Increase in Inventory a Bullish or Bearish

Real Estate

There are those who look at the increase in inventory as a sign that we are going back to the market we saw last decade. However, a closer look shows that we are nowhere near the inventory levels we reached before the crash in 2008.

A normal market would have about 6 months of inventory, but the latest report on sales of existing homes issued by the National Association of Realtors revealed that:

"The unsold inventory is with an offer for 4.3 months at the current sales rate of 4.1 months last year."

A decade ago, prices began to depreciate rapidly in June 2007. At that time, we had a supply for 9.1 months (more than double what we have today) and the inventory continued to increase to a maximum of 11.1 months in April. 2008

With the current levels of buyer demand, any increase in the monthly offer is highly unlikely. As Danielle Hale, Principal Economist at explained:

"After years of record inventory declines, the nearly fixed inventory of September signals a big change in the real estate market. Those who could be buyers who have been waiting for a larger selection of houses for sale could finally see more houses for sale materialize. But do not expect the level to increase drastically.

A lot of buyers in the market are picking up houses as soon as they go on sale, which will keep domestic increases relatively small for the time being. "

What will be the result of the increase in inventory?
The increase in inventory will allow many families who have not been able to find a home to become homeowners. Again, we quote from the 'Z report':

"In our opinion, the short-term narrative is likely to be confusing, but more sustainable growth and affordability will likely be the end result."