The total plunged to 685,000 in December — just over half of the 1.13 million available in December 2019.
By Manuel Gutierrez, Consulting Economist to NKBA
The Multiple Listing Service (MLS), which offers a snapshot about the inventory of homes for sale across the country, reported that in December, there were 685,000 homes currently listed for sale — a dramatic drop of 449,000 from the 1.13 million homes listed a year earlier. Fig. 1 illustrates this mostly downward trend since 2016. (Note that since the data is not adjusted for seasonality, a comparison to the prior month’s inventory would be misleading.)
MLS gives real estate agents access to a nationwide list of homes for sale, but not all homes for sale are necessarily listed under MLS. Some agents opt not to participate in the service, which carries a fee, plus a number of homeowners do not use real estate agents to sell their homes. Still, it provides a fairly accurate picture of the market.
Because of periodic repetitive weather changes, along with timing of the school year, holidays and other factors, December sales are typically among the lowest of any year. In fact, in Fig. 1, the seasonal pattern is clear. Lower inventory levels prevail around the winter months.
However, by ignoring seasonality, it’s evident that inventory of listed homes was relatively flat from 2017 through 2019, shown by the blue line. This was followed by a sharp drop. The increasing demand for homes last year, as a consequence of the need to stay at home during the pandemic, may have voided the need of many prospective sellers to list their homes. Anecdotal data suggests that homes remained on the market for a much shorter period of time in 2020 than they did in prior years.
How does the MLS data compare with home inventory data collected by other sources?
Fig. 2 compares the MLS homes-for- sale data with the inventory of homes that’s periodically released by the National Association of Realtors (NAR in the graph).
The data from both sources follow a similar pattern, except that NAR inventory is roughly 300,000 homes larger on average.
Both NAR and MLS data clearly show the dramatic drop in inventory throughout last year. The typical summer bump in inventory is mostly absent in each series.
MLS data also provides the selling price of listed homes. In December, the median price of single-family homes listed reached $340,000, 13.4% higher than the year before. This is a sharp change from previous years, when prices rose an average of around 6% per year.
Comparing MLS house prices with the NAR, the median price of single-family homes estimated by NAR was 1.6% higher in November than the MLS median.
Fig. 3 shows that house prices also have a distinct seasonal pattern. For any year, the median price is highest around the middle of the year. This follows the seasonality of housing demand, which peaks around the summer months.
Since housing demand is higher during summer months, it stands to reason that house prices will also be higher during those months.
MLS data also shows house inventory levels for local areas or states. For illustration purposes, Fig. 4 captures the recent trend for a handful of states.
For the states displayed, inventory levels for each were relatively stable until 2020, when they began to decline across the board.
Note, however, that higher inventory levels in some states, such as Florida, does not mean that the state generally has more homes for sale. The data reveals that Florida real estate agents are more likely to rely on MLS services than might those in other states.
