Existing Home Sales fell 7.7% from October to November to a 4.09 million unit annualized pace, per the National Association of Realtors (NAR). This was weaker than expectations looking for a 6% decline. Sales were also 35.4% lower when compared to November of last year. This is a critical report for taking the pulse of the housing market, as it measures closings on existing homes, which represent around 90% of the market.

What’s the bottom line? The rise in inventory that occurs every summer from parents listing their homes so their kids are settled for the new school year has clearly crested. Inventory has declined steadily over the last four months, from 1.31 million homes available for sale at the end of July to 1.14 million homes at the end of November. This equates to a tight 3.3 months’ supply of homes.

But inventory is even tighter than that figure implies, as there were only 752,000 “active listings” in November, meaning that 34% of the “inventory” in the Existing Home Sales report is under contract and not truly available. Even though sales have declined, this data also speaks to ongoing demand for homes, as a normal market has 25% of inventory under contract. 

And while there are reports that homes are sitting longer on the market, they are still selling quickly when priced correctly, which is also reflective of demand. Average days on the market increased slightly from 21 days in October to 24 days in November, while 61% of homes sold last month were on the market for less than a month.

To summarize, low inventory and ongoing housing demand will continue to limit the downside in home prices.