The One Housing Statistic That is Back to Pre-Pandemic Levels
Why is matters and what it means for home prices later this year
I remember sitting in my office exactly five years ago, thinking that our jobs at the bank were all about to change. I was correct, but in completely the wrong direction. I thought the real estate market was about to freeze, with falling prices amid demand that was about to hit a screeching halt. I believed that many of our commercial borrowers were about to falter and some would fail as the world shut down.
While many businesses did, indeed, experience excruciatingly difficult times (especially in industries like restaurants, hospitality, travel, etc.), others emerged from the pandemic mostly unscathed, and often in better shape than when it began thanks to business relief programs, low interest rates, and strong consumer demand.
The real estate market surged. This was due in large part to the Federal Reserve ratcheting interest rates down in an effort to help prop up the rapidly deteriorating economy, and also because of the suddenly inward-facing behavior by millions of Americans who were suddenly much more concerned about their living arrangements at home and who had money to spend. Lastly, an underappreciated aspect of the real estate surge was that yields on other “safe” investments like cash, CDs, money market accounts, and government bonds were next to nothing, so money flowed into hard assets like real estate instead.
Anyway, that’s a bit of an aside to introduce today’s article, which is about the potential re-stabilization of the housing market. Would-be buyers who have grown beyond frustrated are looking for any signs of a normalization and, for them at least, the signs of hope for falling prices. Finally, five years out, they may have one.
Months of Supply
There are countless statistics that can be used to track the housing market, and nearly every single one of them went out of whack from 2020-2023. Few have normalized since. But in this past month’s report on the supply of existing homes for sale, there was an interesting jog higher in the statistic that tracks the number of months of supply of homes for sale.
The “Months’ Supply” statistic represents how long it would take to sell all of the homes for sale in the current market if no new homes were added (ignoring that there are some homes on the market, anecdotally speaking, that will never sell because they are in such poor shape or priced way too high).
In February, the Months’ Supply of existing homes ticked up to 3.5 months. This was up from 3.2 months in January, and up from 3.0 months one-year-ago in February 2024. The Months’ Supply bottomed out in January 2022 at just 1.6 months. In February 2020, which is the last comparable February prior to things getting so out of whack with the housing market, the Months’ Supply was 3.1 months.
Why Does it Matter?
Okay, you might say, 3.5 months of supply versus 3.1 months of supply is not a huge difference. Who cares?
Well, not only is it a rare housing statistic that has retraced itself back to historical levels, it could signal price softness in the months ahead. But first: a caveat.
The Months’ Supply does indicate there are more options for buyers on the market, which is a positive thing if you’re on a search for a new home. However, there are actually not more existing homes for sale today than there were five years ago. In February 2020, per data from the National Association of Realtors compiled by the Federal Reserve, there were about 928,000 existing homes listed for sale (newly constructed homes is a separate category, by the way). In February 2025, there were about 848,000, which is nearly 9% fewer homes listed today than five years ago.
What, then, to make of the Months’ Supply being greater even though the number of listings is lower? The main reason is that the pace of buying has slowed. Homes are staying on the market for longer because buyers have pulled their foot off of the accelerator. They are thinking more strategically, not jumping as readily, and generally being more patient in this market. The frenzy and froth in the market are gone, and the sales cycle is lengthening out.
Why? It is really just a function of math, plus uncertainty about the economy. Home prices have not come down yet in most markets, and although interest rates have dropped a bit recently, they are still elevated. With the math working against buyers on both price and rate, many are waiting things out.
On the economy, it feels like many people and businesses are treading water right now, trying to get a read on where things are going under Trump. When people are feeling uncertain (or, beyond uncertain, actually pessimistic), they are less likely to make big purchases and major life decisions, like buying a house.
The Impact on Prices
The recent rise in the Months’ Supply could indicated not just a housing market that is taking a breath, but one in which prices may ease downward. With less competition among buyers who are collectively more patient, there could be price reductions among sellers in order to attract those buyers. If this trend continues, it could indicate a shift towards a buyers’ market, which could only be reinforced if consumer confidence weakens further or the economy as a whole is put into peril. Sellers may have an idea of what they want to get for their homes, but they will have to eventually meet buyers where they are, and buyers may be looking to lowball.
Author’s Note: another piece of the supply puzzle is around construction. I’ve been reviewing data and talking to some builders out there about what they are seeing, and I’ll be coming back to this topic in the weeks ahead with a look at the start of the spring construction season.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.