The media have largely missed a fascinating story in the National Association of Realtors (NAR) existing home sales data. In the last two months, the inventory of existing homes for sale has fallen by 563,000 (13.5 percent) even as home sales have been near 20 year lows. This would appear perverse. It implies that homes are being placed on the market at extraordinarily low rates. Given the sharp surge in job loss over the last four months, it seems unlikely that fewer people want to sell their homes. There are two possible explanations. First, many foreclosed homes don't appear in the realtors' data. It is possible that we are seeing more bank owned properties that are being sold at auction, but are not listed as inventory. In that case, the NAR data is becoming a less accurate measure of inventory. The other possibility is that many would be home sellers are holding back in the expectation that the market will improve. This would imply that the market may be flooded with homes at some point in the future, as soon as it shows any sign of an uptick. That is also not a terribly good story for those hoping for prices to stabilize any time soon. It likely also means a rather unhappy story for those opting to wait. They may be looking at much lower prices when they do eventually put their homes on the market.
--Dean Baker