by Calculated Risk on 12/26/2021 11:59:00 AM

Today, in the Real Estate Newsletter: Question #10 for 2022: Will inventory increase as the pandemic subsides, or will inventory decrease further in 2022?

Brief excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2022. Some of these questions concern real estate (inventory, house prices, housing credit, housing starts, new home sales), and I’ll post those in the newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.
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And the sharp decline in inventory during the pandemic (green arrow) was an indicator that price appreciation would increase. Inventory declined due to a combination of potential sellers keeping their properties off the market during a pandemic, and a pickup in buying due to record low mortgage rates, a move away from multi-family rentals and strong second home buying (to escape the high-density cities). And at the same time, demographics were favorable for home buying (a large cohort has moved into the peak home buying years).
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First, it appears we will see record low inventories over the next few months. This suggests we will see further strong price gains over the next several months (with low inventories).

In 2021, the NAR showed inventory bottomed in January and (inventory bottoms in December), however the local MLS data, and the Altos Research data, showed inventory bottomed even later than usual - in March or early April 2021.  If 2022 follows the normal seasonal pattern, we will see inventory increasing by February (and maybe even in January).

The timing of the seasonal bottom will be important this year.  If inventory bottoms seasonally in December, we might see inventory increase YoY later in 2022.  However, if inventory doesn't bottom until March or April, we will probably see another crazy year with little inventory.

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