I’ll say this until I’m blue in the face. We are in an inventory crunch, and have been. Between a generally hot market with low inventory levels over the last few years, COVID, and interest rates, demand for homes has been at all-time highs, driving inventory levels lower and lower. We track a lot of inventory moves on a month by month basis, but I went a little deeper, and have been tracking a specific market movement on a daily basis. If you’re not a numbers person, this may hurt your head a bit… but I’ll do my best to explain.

What I’ve been doing since early August is tracking the number of homes that are Under Contract (in our market, homes have 2 statuses, Under Contract Show and Under Contract No Show… both mean the home has an accepted offer though) compared to the OVERALL number of homes currently not sold… meaning both Active on the Market, and Under Contract (as these can always fall out of contract). We’re obviously ignoring officially SOLD homes, because those are no longer available as the sale has fully executed and ownership has been transferred.

My thoughts on this are based on the fact that the higher the percentage of homes that are IN CONTRACT compared to the Overall number of potentially available homes, the stronger the market is, and the less overall inventory we are seeing, which should match up with the Monthly data that I pull. Conversely, I’m also taking the percentage of the actual Active (ER/EA status in our market) compared to the market in its entirety. The % of Under Contract and the % of Active Listings will always equal 100%. Therefore, if there are more homes in contract on a day by day basis, there will be less homes available for sale on that corresponding day. Head hurt yet?

Here’s what it looks like on a daily chart (measured every weekday for the last 12-13 weeks or so).

This may not look like much, but usually when you run charts on a daily basis, they don’t… it’s the overall trend that you’re looking for. For instance, today’s data actually had a slight down trend for the UC% (and the ER% went up by the same amount of course). But when you throw a trend line on the graph, you do start to see the bigger picture, as shown here:

Same data. Same info, just a trend line added to show the Blue Line has been steadily increasing, causing the red line to decrease.

What does this all mean?

Not a lot, unless you’re really looking at some potential LEADING indicators of where our market is heading. This will have no direct relevance on pricing, but it will have some indication. But here’s how I look at it. We know inventory has been low, and it looks like it’s trending LOWER. The larger the blue number is, the lower the red number is, and that really represents the number of homes, as a percentage of the market, that are available. It also shows you that more homes are GOING INTO CONTRACT than coming available, again as a percentage. So, what I would expect to see is that if we look at the inventory levels now compared to August, they will be lower. I also would expect our Months of Inventory level to be lower now than in August as well.

Going a bit deeper… I would also believe our trend of increasing prices WILL CONTINUE!

When you look at something daily, it doesn’t tell the whole picture, but as you start looking at more and more dots (data points), it does start to look like something. Then, when you pull your head back and look at the whole data set… you get the full picture, just like with pointillism, as shown here:

What are your thoughts? On the blog, or the painting?