February 2022: The January Unsold Inventory Index was 2.1 months, the first time it has been over 2 after a historic run of 10 consecutive months under 2 months. As the prime indicator of the current relationship between supply and demand, the Unsold Inventory Index is telling the story of the extreme difficulty would-be-buyers have been facing.

BACKGROUND:  The Unsold Inventory Index is the most important statistic used to predict value increases or decreases. It is the current relationship of supply and demand for the housing market. The index is created by dividing the current supply (number of listings) by the current demand (number of sales). The result shows the time it would take to deplete the inventory of houses for sale at the current sales rate. It is expressed in months.

Years of statistical analysis have shown that a 6 ‑ 8 month unsold inventory index has been normal‑ meaning the market is balanced, and home prices are stable. Historically, when the Index has been less than 6 months, prices can increase, and when it is more than 8 months, prices can decrease. The further away from normal the index is, the stronger the influence on price movement.