U.S. home prices have risen year-over-year by more than 6 percent since August 2017, fueled by strong demand and a lack of supply in many markets. However, due to rising mortgage interest rates and slowing sales nationally, the number of homes for sale increased slightly to a 3.2 months’ supply in July 2018, up from 3.1 months in July 2017.
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 20.2 months and the other tiers remained less than 15 months.
Here’s how each price tier’s months’ supply in July 2018 compares with its recent history:
With demand strong and supply tight, many homes don’t spend long on the market in 2018. Figure 2 shows that over the past four years the share of homes selling within 30 days of the initial list date has been at historical highs. In July 2018, the share selling within 30 days was 25.4 percent, which was almost double the pre-crisis peak in 2005 and more than triple the level during the February 2008 trough. Figure 3 shows the share of the for-sale inventory that was on the market for more than 180 days. In July 2018, that share was 19.9 percent, about 2.2 percentage points lower than the average in 2017 and half of the peak in March 2009.
Figure 4 shows the months’ supplies in the U.S. (based on data for 65 CBSAs) and selected CBSAs in July 2018 and July 2017. The months’ supply in West Palm Beach and Honolulu increased 1.2 and 1.9 months, respectively, in July 2018 compared to a year earlier. San Francisco and Seattle had the lowest months’ supplies in July 2018: 2.0 months and 2.4 months, respectively. Philadelphia showed the largest decline – 0.9 months – in July 2018 compared with a year earlier.
 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 65 CBSAs. To determine the price tier, the median list price was the median of homes listed in the 65 CBSAs for the given month.
 Figures 2 and 3 show a rolling 12 month average.
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