And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.
And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases.
I don't have a crystal ball, but watching inventory helps understand the housing market.
Inventory, on a national basis, was up 2.7% year-over-year (YoY) in May this was the tenth consecutive month with a YoY increase, following over three years of YoY declines.
The graph below shows the YoY change for non-contingent inventory in Houston, Las Vegas, and Sacramento and Phoenix, and total existing home inventory as reported by the NAR (through May).
Click on graph for larger image.The black line is the year-over-year change in inventory as reported by the NAR.
Note that inventory was up 98% YoY in Las Vegas in May (red), the tenth consecutive month with a YoY increase.
Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY last year as oil prices increased. Inventory was up 10.5% year-over-year in Houston in May.
Inventory is a key for the housing market. Right now it appears the inventory build that started last year is slowing.
Also note that inventory in Seattle was up 124% year-over-year in May (not graphed)!