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National Months’ Supply of Homes For Sale at 5.7 in October 2015

Denver has the lowest months’ supply in October

Shu Chen    |    Housing Trends

The U.S. home sales market remains strong, and the for-sale inventory remains lean. Nationally, the number of homes for-sale equated to a 5.7 months’ supply1 in October 2015, back down to the pre-housing-crisis level and only a third of its peak in January 2008.

Figure 1 breaks out the months’ supply into four price tiers: low price (0-75 percent of median list price), low-to-middle price (75-100 percent of median list price), middle-to-moderate price (100-125 percent of median list price) and high price (125 percent or more of median list price). Usually the high price tier has the largest months’ supply and the low-to-middle price tier has the lowest months’ supply. The differences in the months’ supply among the four price tiers were greatest during 2007-2009 crisis period, when the high price tier peaked at 21.2 months while the other tiers remained under 15 months.

Here’s how each price tier’s months’ supply in October 2015 compares with its recent history:  

  • The low price tier had a 4.8-month supply, which was back down to the September 2005 level, and less than half of its January 2008 peak. The October 2015 months’ supply was still 26 percent above the low-price tier’s May 2002 trough.
  • The low-to-middle price tier also had a 4.8-month supply in October, which was back to its September 2004 level, as well as about a third of its January 2009 peak, and 34 percent above its June 2000 trough.
  • The middle-to-moderate price tier had a five-month supply in October, back to its April 2005 level. The October supply was about a third of its January 2008 peak, and 31 percent above its August 2003 trough.
  • The high-price tier had a 7.6-month supply in October, back to its June 2006 level. The October supply was a third of its January 2009 peak, and 55 percent above its June 2000 trough.

Figure 2 Sold in 30 days

Figure 3 inventory on market

With demand strong and supply tight, many homes don’t spend long on the market.  Figure 2 shows that over the past two years the share of homes selling within 30 days of the initial list date2 has been at historical highs. In October 2015, the share selling within 30 days was 16.2 percent, which is higher than the pre-crisis peak of 13.9 percent in February 2006, and about twice November 2008 trough. Figure 3 shows the share of the for-sale inventory that was on the market for more than 180 days.  In October 2015, the share was 23.5 percent, which was about 8 percentage points lower than the peak in July 2009 but still about 7 percentage points higher than the trough in January 2005.

US and CBSA Months Supply

Figure 4 shows the months’ supplies in the U.S. (based on data for 66 CBSAs) and selected CBSAs in October 2014 and October 2015. Nationwide, the home sales market stayed strong over the past year, with only a tiny gain in the months’ supply-5.7 months in October 2015 compared with 5.5 months in October 2014. Half of the CBSAs had decreases in their months’ supplies compared with a year earlier. The months’ supplies in the Miami and Chicago metro areas increased from 8.7 months and 6.4 months in October 2014, respectively, to 9.3 months and 8.3 months in October 2015. Denver and San Francisco had the lowest months’ supplies in October 2015: 2.2 months and 2.6 months, respectively.

[1] The month’s supply is calculated as the ratio of the for-sale inventory at the end of the month to the number of homes sold during the same month, and represents the number or months it would take to sell the inventory at that month’s sales pace. The U.S. statistics are based on data for 66 CBSAs.  To determine the price tier, the median list price was the median of homes listed in the 66 CBSAs for the given month.

[2] Figures 2 and 3 show a rolling 12 month average.

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