Everyone is asking where did all the inventory of homes go? Over the last 2 years we have seen a 61% decline in the number of properties available.

In Feb 2011 there were 5100 homes available. Feb 2013 there are 1989 homes available. That’s a net reduction  in the supply by 3,111 homes over the past 2 years.       

An even more dramatic revelation is the months supply of inventory. The months supply of inventory is the time it would take to sell all the remaining inventory based on how fast homes sell.  Monthly supply of inventory is considered a leading indicator of sales activity and the direction that the market is headed.

 As you look at the graph you can see there is an 85% decline is the months supply of inventory from  Feb 2011 to Feb 2013. In Feb 2011 there was 7.8 months of inventory.  Fast forward to Feb 2013 and see that the supply has shrunk to 1.2 months of inventory. What that means to you is that it would only take 1.2 months time to sell all the remaining inventory.

 To give you a sense of this number, a normal market should have about 4-6 months supply of inventory. When the inventory number falls to 4 or less we begin to see appreciation in pricing. The fact that this number is hovering below 2 months means that there is a lot of upward pressure on pricing at this time.

 To show you what I mean look at the chart below which shows a 32% increase(red bars) in the median asking price and a 17% increase(green bars) in the sold price over the past 2 years.