One reason for concern about the Realtors’ data is that when assessing the outlook for future sales, forecasters rely heavily on the inventory of homes on the market, which is generally expressed in number of “months’ supply.”
That number is derived by comparing the number of unsold homes and the current pace of sales. Prices tend to be fairly stable when the market has about six to eight months’ worth of unsold homes. Tighter supplies tend to push prices higher, bigger supplies tend to depress prices.
According to the NAR’s latest monthly data, the number of unsold homes in February represents an 8.6-month supply at the current sales pace, based on an annual sales rate of 4.88 million.