After Loosening a Bit in 2018, US Home Supply Tightened Again in 2019

National Supply of Homes for Sale fell to 3 months
in December 2019

By Shu Chen Consumer Behavior, Real Estate

With home prices reaching new highs in the longest economic expansion in U.S. history[1], affordability has become a concern and is pushing potential homebuyers away. Adding to the affordability challenge is the fact that housing supply keeps hitting historical lows. Nationally, the number of homes for sale equated to a 3-month supply[2] in December 2019, falling from a supply of 3.7 months in December 2018.

Figure 1: High-Priced Homes Have the Most Supply

Figure 1 breaks out the months of supply for December of each year into four price tiers: low price (0-75 percent of the median list price), low-to-middle price (75-100 percent of the median list price), middle-to-moderate price (100-125 percent of the median list price) and high price (125 percent or more of the median list price). Supply is lowest for the low-to-middle and middle-to-moderate price tiers and highest for the high and low-price tiers.

The level of supply fell at all price levels in December 2019 from a year earlier. Here’s how each price tier’s months of supply in December 2019 compares with previous years:

  • The low-price tier had a 3.4-month supply in December 2019, down from 3.9 months in December 2018 and about one-quarter of its peak in January 2008.
  • The low- to middle-price tier had a 2.1-month supply in December 2019, down from 2.7 months in December 2018. The December 2019 supply was about one-sixth of its January 2009 peak.
  • The middle- to moderate-price tier had a 2.3-month supply in December 2019, down from 3 months in December 2018. The December 2019 supply was about one-sixth of its January 2009 peak.
  • The high-price tier had a 3.7-month supply in December 2019, down from 4.5 months in December 2018. The December 2019 supply was about one-fifth of its January 2009 peak.

Figure 2: Homes Don't Spend on the Market

Figure 3: Sale Inventory At Low Levels

With demand strong and supply tight, many homes didn’t spend long on the market in 2019. Figure 2 shows that over the past two years the share of homes selling within 30 days of the initial list date[3] has been at the highest level since 2000. In December 2019, the share selling within 30 days was 28.1%, higher than the pre-crisis peak of 20.8% in August 2004 and double the level during the January 2008 trough. Figure 3 shows the share of the for-sale inventory that was on the market for more than 180 days. In December 2019, that share was 19.1%, which was 1.7 percentage points lower than in December 2018, less than half of the August 2011 peak of 39.9%.

Figure 4: Supply is Down in Most Large Metros

Figure 4 shows the months of supply in the U.S. (based on data for 51 metropolitan areas) and selected metropolitan areas in December 2019 and December 2018. Nationwide, the inventory decreased 7.2% year-over-year in December, with the supply at 3 months in December 2019 compared with 3.7 months in December 2018. Out of 20 metropolitan areas, 19 showed declines in months’ supply in December 2019 compared with a year earlier. San Diego had the largest drop in supply, decreasing 2.2 months, from 4 in December 2018 to 2.8 in December 2019.

[1] Special Report: The Role of Housing in the Longest Economic Expansion https://www.corelogic.com/downloadable-docs/corelogic_2019_specialreport.pdf

[2] The months of supply, or months of inventory, 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 of months it would take to sell the inventory at that month’s sales pace. The U.S. statistics are based on data for 51 metropolitan areas. To determine the price tier, the median list price was the median of homes listed in the 51 metropolitan areas for the given month.

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

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