Inventory is flattening on declining sales. A necessary stage to work through to get to a bottom. But not a sign thereof. Potential “want to” sellers are currently on the sidelines because it is pointless to list your home with so few buyers and compete against the REOs and other “must-sell” sellers. Number of sales is still declining year-over-year.
What usually happens next in the market cycle is that sales bottom out, then flatten and eventually start increasing (with seasonal variations obscuring the overall trends). Inventory may initially also increase to match increased demand as want-to sellers come back into the market. We may even see increasing inventory at the bottom of the market. But what matters is how much inventory relative to sales. As sales start to increase faster than inventory, that’s when we start to see a recovery.
