National supply of homes for sale increased to 2.5 months in August 2022
Quick Takes:
- Rapidly rising mortgage rates are dissuading potential homebuyers.
- Long-standing housing supply pressures began to ease, reaching a 2.5-month supply in August 2022.
- Nevertheless, the supply of homes remains lower than historical, pre-pandemic averages.
Rapidly rising mortgage rates and record-high home prices are dissuading potential homebuyers from purchasing. After months of razor-thin inventory margins, U. S. housing supply pressures eased in August. Nationally, the number of homes for sale hovered at a 2.5-month supply[1] in August 2022, an increase from the 1.8-month supply a year ago in August 2021. However, despite the buildup in active inventory, the current supply remains much lower than the 20-year, pre-pandemic average of 4.6 months[2] (Figure 1).
Figure 1: Supply Pressure Eases in 2022
Figure 2 breaks out months of housing supply into four price tiers:
- Low price (0%-75% of median list price)
- Low to middle price (75%-100% of median list price)
- Middle to moderate price (100%-125% of median list price)
- High price (125% or more of median list price)
In 2022, the months of supply increased in all price tiers when compared to 2021 levels. With the exception of the highest price tier, months of supply is back to 2019 levels.
Figure 2: Months of Supply (August)
With fewer homebuyers and competing offers, sales are slowing and inventory is climbing. As of August 2022, unsold inventory[3] was up 9% compared to August 2021, but levels are still 25% below the inventory average from 2015 to 2020. Home sales were 23% less than in August 2021. August 2022 home sales registered the lowest sales since 2013.
Figure 3: Inventory Increased while Sales Dipped
Year-over-year percent change
Housing supply not only increased in existing homes, but the number of new homes on the market also expanded. According to the CoreLogic construction report, U.S. permit authorizations in March 2022 were up 7% from a year earlier, indicating that more new construction is on the horizon. With a larger housing supply and fewer bidding wars, the seller’s market that has dominated in recent months is now shifting toward a buyer’s market.
[1] The months of supply, or months of inventory, is calculated as the ratio of the for-sale inventory at the end of the month compared to the number of homes sold during the same month. This figure 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 68 metropolitan areas.
[2] Pre-pandemic, long-term average is the 20-year mean of monthly supply from 2000 to 2019 in August.
[3] Unsold inventory includes the listings that were temporarily withdrawn from the market within 30 days.
