Realtors have been saying for multiple years now, basically since the start of the pandemic, that inventory has been way below average. And this is undeniably accurate. It didn’t seem that way at first, with 5.6M home sales in the US in 2020, a 13 year high at the time. The following year, that number increased to 6.12M home sales. The following year however, home sales plunged by over a million, marking the first time we actually felt the inventory shortage we’d long been talking about. For 2023, we are projecting about 4M home sales. This is is a drop of over 30% from 2021 numbers. So we felt it a little last year, and we’re feeling it a lot this year.
Talk in the industry right now, however, is of inventory rising. Worth stating - I mean this in my local market, which is southern New England with a focus on Rhode Island. And in Rhode Island, it’s true that single family inventory has been steadily increasing for several weeks now. For reference, I am writing this in early November 2023.
But as is often the case, these numbers don’t tell the entire story. And, as my last entry focused on the idea that real estate content is absolutist, you know I’m someone who likes to dive beneath the numbers. So the question I ask to do that on this topic is “Is real estate inventory ACTUALLY rising?”
The data
Let’s look at those numbers. I looked at new inventory numbers for the last seven weeks and then selected another seven week period from earlier this year, when inventory was lower but the market was still considered hot. Well, over the last seven weeks we’ve seen 1526 new single family homes hit the market in Rhode Island. That’s an average of 218 new single family listings weekly. This number represents a period where we are saying inventory is rising. Well, going back to spring (mid April to early June, specifically), that period 1608 new listings hit the market, for an average of 230 per week.
Now, obviously you can’t really get the full story from two data points. I did investigate a third seven-week period, early February through end of March. For this period, the average inventory over seven weeks was 170 new listings per week. However, this is typically a slow period in the year, and inventory was barely half of what it is now. So I’m putting less weight on this period as it does not feel like the same market. Anyway, this immediately begs the question - how is it possible that we say inventory is rising now when the influx of new homes is smaller than during a period we talked constantly about a lack of inventory?
What do I actually think this means?
The answer is simple…we’re looking at different numbers to reach a singular conclusion. I’m using the rate of new single family listings to make a point, but the point is about total inventory. So what’s REALLY happening is not that we are seeing fewer homes come available, it’s that the homes that DO come available sit on the market for longer. That’s my hypothesis anyway. Now, I’m not actually seeing that in the data, as the average days on market (DOM) for both periods is 30-31 days. For reasons I won’t get into here, the data in our MLS is not reliable for DOM calculations. However, my experience in the market right now is that we are seeing properties sit for longer, we are seeing more price drops, and we are seeing fewer multiple offer situations. So in short, yes there’s more inventory, but really that’s because old inventory is taking longer to sell.
What is ACTIONABLE about this?
Maybe you’re a buyer who took a step back from the market because you were sick of competing with multiple other buyers, waiving inspections, and paying way more than what the house was worth. Well, with less competition for each available property, you have more negotiating power than you have at any point in the past three years. As a seller, perhaps you’ve been waiting for the absolute perfect time to sell. Well, it seems like the absolute peak is behind us for now, so if you are waiting for top dollar, the anticipation is that right now is the best remaining opportunity to go get that. That is, unless interest rates continue on a downward trend, which remains to be seen. Until then, it seems that the market is cooling a bit for sellers so anybody considering selling their home soon should consider selling their home now!