Inventory turnover – the total supply of homes for sale nationwide as a percentage of occupied residential inventory – was low prior to the pandemic, but began to drop precipitously starting in April, 2020. Since 1991, on average, 2.5% of the stock of homes are for sale in any single month. Throughout 2019 and preceding the pandemic, average inventory was 1.65%, but the pandemic-induced supply contraction further reduced average inventory to nearly 1.4% Since then, average inventory has steadily declined to 1.3%. That means only 130 homes in every 10,000 are for sale, compared with almost double that amount in normal times!
Existing-home sales make up approximately 90% of all home sales and in October the seasonally-adjusted months’ supply for existing homes hit a historic low of 2.5 months ( most recently described as 2.2-2.3 months of inventory). As existing homeowners have withdrawn supply, average tenure length – the amount of time someone lives in their home – has soared to a historic high of approximately 10.5 years. Ultimately, rising tenure length means there are fewer homes on the market and as demand has surged the competition among home buyers for the small amount of homes for sale drives prices up.
Excerpted from Mark Henry, Chief Economist for First American Title Company