Fewer homes on the market means that fewer homes are selling, right?

Nope, not necessarily.

As you can see above, there have been an average of 38% fewer homes on the market (at any given time) this year as compared to two years ago.

But there have been 7% more home sales this year than two years ago.

So what gives?

Basically, these metrics can and often do change independently of each other.

Number of homes for sale (inventory) is not the same as number of homes listed for sale.

If 100 homes are listed for sale at the start of a month and 5,000 homes are listed for sale during that month, and all 5,000 of them go under contract by the end of that month, then there are still only 100 homes for sale -- but there were 5,000 contracts signed that month!

So, if buyers are buying faster than sellers are deciding to put their homes on the market, then this dynamic (sales up, inventory down) can take place.

Just because you see that inventory levels are dropping - don't assume that home sales are also declining -- home sales (and prices) are actually on the rise, despite fewer and fewer homes being on the market at any given time.