The number of homes on the market just hit a record low of 228 for sale. This is the lowest number of homes that I have seen since I started tracking the number in 2005. See Chart Below.
During 2003, we also had an extremely low inventory of homes for sale. What however is different is that during 2003, prices gains were 15-30% per year for several years in a row, until the market finally cooled in 2005 and reversed in 2008.
Today is very different. Just last month I noted that price gains had slowed to about 2% year over year. The real estate market is 8 years into a recovery that started in 2011. This could lead one to believe that this recovery has seen better days and the slowing of price gains could point to a potential reversal in prices. Yet this record 15 year low inventory says otherwise. Low inventory is normally quite bullish.
To put this 228 homes in context, there are about 175 home sales every month in Long Beach. 228 homes only provides about a 5 week inventory of homes. This is very low. Is this low inventory just a fluke? Is this just a seasonal December thing? Maybe it is a temporary thing because rates just dropped to very low levels, and buyers got off the fence?
The one thing to glean from this stat is that even though price gains have slowed, there is unlikely to be a significant correction to the downside as there just isn’t enough supply to cause a drop in prices.
One of contributing factors to the low inventory is the low number of people moving. Look for that article in my previous post. Certainly the two articles go hand in hand.
So on one hand we have a cooling market, yet the low inventory tells me prices should be hot. These two data points are definitively at odds with each other. I will keep you posted as this plays out in early 2020.