Housing Inventory: “Severe, Accelerating, Chronic Shortages in Every Market, in Every Price Range”

In stark contrast to the recent New Home Sales data, a new white paper from Black Knight suggests that, by the time we include existing homes, there are actually “severe, accelerating, chronic shortages in every market,” and “in every price range.”   Collateral Analytics (a division of Black Knight) compiles various monthly statistics focused on price, availability, time on market, etc. to arrive at what it refers to as a “market condition rating” (MCR) for the top 100 metro areas in the U.S.  The MCR ranges as follows: “hot, strong, good, normal, soft, weak, distressed” with a majority of the nation tending to fall in the middle 3 categories at any given time. Today’s analysis points out that we typically see less than 10% of the market fall into one of the extreme categories, even at the top/bottom of major housing cycles, but that current conditions may force a revision in the MCR methodology.  Reason being, 16% of metro areas are in “hot” territory right now and a whopping 80% are very close.  Moreover, zero out of the 100 metro areas ranked as anything less than “good” on the MCR scale. While all of the data points used to calculate MCR are connected, the paper points out that one stands out from the rest in the current cycle: Months of Remaining Inventory. The following charts shows this statistic on the national level, where it looks substantially similar to the same metric from NAR’s Existing Home Sales data.