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 Realtor.com 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."