MacroPass: Lance Lambert On Rising Housing Inventory

Supply is now up to levels not seen since 2020

This week’s installment (the 13th!) of our new MacroPass service for premium members of this Substack comes from housing analyst Lance Lambert.

It’s actually two recent reports tracking residential housing inventory in the US. The future of home prices tends to be highly inversely correlated with the trajectory of supply. When more inventory hits the market, prices tend to respond by coming down…and we’re seeing more inventory this year than we’ve seen since mid-2020.

Does this mean lower prices indeed lie ahead?

If you somehow missed our previous announcements, MacroPass is a weekly rotating selection of premium analysis from many of the big thinkers interviewed on Thoughtful Money.

To-date that list of contributors includes experts like Stephanie Pomboy (Macro Mavens), Danielle DiMartino Booth (QI Research), Tom McClellan, Michael Howell (Capital Wars), Darius Dale (42 Macro), Doomberg, Kevin Muir (The Macro Tourist), Alf Peccatiello (The Macro Compass), Lance Lambert (ResiClub), Ed Yardini (Yardini Research), David Hay (Haymaker), Melody Wright (M3_Melody), David Stockman (Contra Corner), David Brady (FIPEST Report), John Rubino, Adam Kobeissi (The Kobeissi Letter), Sven Henrich (Northman Trader) and Jeff Clark (The Gold Advisor)…and Chris Whalen just joined the faculty this week!

The reports issued so far in this MacroPass series include

• Doomberg on the future of nuclear energy

• Jeff Clark on Outcrop Silver

• Ed Yardeni on the labor market, fed rate cuts & more

• David Stockman on stolen economic growth

• Michael Howell on global liquidity

• Melody Wright on mortgage default risk

• Edwin Dorsey on the short argument for Primerica

• Danielle DiMartino Booth on the debt-default reckoning lying ahead

• David Hay on the wild action in the Japanese yen

• Kevin Muir on the emerging opportunities in Chinese stocks

• Alf Peccatiello on the growing fragility in credit markets

• Tom McClellan’s excellent April Market Report

If you’re already a premium subscriber to this Substack, just continue below to read this week’s reports from Lance.

And if you’re not (yet), read the start of it below. If you like what you see, just upgrade to premium and access the full report, as well as all past and future MacroPass content.

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Diverging housing markets: 50 below and 50 above pre-pandemic inventory levels

When assessing home price momentum, ResiClub believes it's important to monitor active listings and months of supply.

June 30, 2024  

AI generated image by ResiClub

Generally speaking, housing markets where active inventory has returned to pre-pandemic levels have experienced weaker home price growth over the past 24 months. Conversely, housing markets where active inventory remains far below pre-pandemic levels have, generally speaking, experienced stronger home price growth over the past 24 months.

Let’s take a quick look at…

1. The 50 housing markets where active inventory is furthest BELOW pre-pandemic levels.

2. The 50 housing markets where active inventory is furthest ABOVE pre-pandemic levels.

Note: The “5-year” column is the difference in active listings in May 2024 compared to May 2019.

Click here to view an interactive version of the chart below displaying data for +800 metros

Unlike many Southwest and Southeast housing markets, many Northeast and Midwest markets have lower levels of homebuilding. As new supply becomes available in Southwest and Southeast markets, and builders use affordability adjustments like buydowns to move it, it has created a cooling effect in the resale market. The Northeast and Midwest don’t have that same level of new supply, so resale/existing homes remain the only game in town.

Additionally, some pockets of the Midwest and Northeast didn't see local pricing fundamentals stretch as far from incomes during the boom as some markets in the Sun Belt did.