Excerpt:
This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through January 2022).
Note that the months-of-supply is not seasonally adjusted.
There is a clear relationship, and this is no surprise (but interesting to graph). If months-of-supply is high, prices decline. If months-of-supply is very low (like now), prices rise quickly.
In January, the months-of-supply was at 1.6 months, and the Case-Shiller National Index (SA) increased 1.56% month-over-month. The black arrow points to the January 2022 dot. In the February existing home sales report, the NAR reported months-of-supply increased to 1.7 months.
My sense is the Case-Shiller National annual growth rate of 19.98% in August was probably the peak YoY growth rate, however, since the normal level of inventory is probably in the 4 to 6 months range – we’d have to see a significant increase in inventory to sharply slow price increases, and that is why I’m focused on inventory!
Note: I’ll have more on real prices, price-to-rent and affordability tomorrow.emphasis added
