Inventory Changes Can Reveal Reasons For Fewer Home Sales

Contract activity is slowing, a bit, and that will likely eventually lead to fewer sales -- that is to say fewer sales in 2020-YTD than in 2019-YTD.

So, if we get to that point, perhaps in July 2020, what shall we conclude about the state of our local housing market if we're seeing fewer home sales this year than last?

After all, we have been seeing relatively steady increases in the number of homes sales for almost 10 years now!

I think inventory trends (at such a future date) will help reveal the reason for fewer home sales.

If fewer home sales are accompanied by rising inventory levels... that will indicate that more sellers want to sell their homes than there are buyers who want to buy homes.  That will mean that the market is softening and it will become less of a seller's market than in the past.

If fewer home sales are accompanied by steady or declining inventory levels... that will indicate that fewer sellers want to sell their homes and the buyers are still there wanting to buy homes.  That will mean that the market is staying strong with sustained buyer interest despite an interruption in the flow of sellers willing to sell.

So -- fewer home sales could mean two very different things -- and thus far, it's seeming that it's the second scenario -- fewer sellers willing to sell despite a consistent pool of buyers ready to buy.