The housing market is shifting—here’s where it’s happening most rapidly

The author of ResiClub wrote an article in October 2023 about a key housing market metric, suggesting that traditional rules of thumb may not apply in the post-pandemic housing boom environment. The author proposed a new metric: comparing a local market's active inventory to its pre-pandemic 2019 level, which helps gauge short-term pricing momentum and downside risk. Markets with inventory below 2019 levels tend to exhibit tightness, while those above 2019 levels experience a shift in favor of homebuyers. The analysis still holds true heading into 2025. Housing markets with inventory above 2019 levels have experienced weaker home price growth or declines, while those with inventory below 2019 levels have seen more resilient home price growth. A scatter plot shows the correlation between active inventory and home price shifts in 250 US metro areas. The data cut remains useful, but its usefulness will diminish over time as market sizes change. Traditional rules of thumb, such as the six-month supply threshold, have fallen short in this cycle. Comparing active inventory to 2019 levels remains a useful gauge for the shift in the supply-demand balance, capturing the degree of tightness or softening better than traditional measures. Markets with inventory above 2019 levels tend to see demand weaken, restoring buyer leverage and producing home price corrections, while markets with inventory below 2019 levels exhibit greater pricing resiliency.