Annual inventory has peaked… or has it?

The market has been very interesting to say the least. On the bright side, we’ve seen an increase in inventory by over 30% Year Over Year nationally.

Locally, we’ve seen a 27.9% increase in inventory (2024 numbers are estimated as we only have data as of the day of this writing on 04 NOV 2024).

So the Massachusetts market, as a whole, is following the national data trend.

I’m always looking for a way to connect data with reality for the purpose of having a better understanding of what’s really going on. So I became curious, “Is there a connection between active inventory and interest rates?”

So I headed on over to the Federal Bank of St. Louis website, fred.stlouisfed.org, to gather some data. Here is what I got:

Based on the data, there does appear to be a strong correlation between the data. Not to get too geeky, but the Pearson correlation, which can vary from +1 to -1, is -0.77… so the correlation is negative (as one value goes up, the other goes down) and is greater than -0.5, indicating a strong correlation.

And you can figure this intuitively - if rates go up, inventory goes down and vice versa.

So bringing this back to the title of this section, has inventory peaked?

In the last week, interest rates for a 30-year mortgage have risen to an average interest rate of 6.91% for all 30-year mortgages. Overall, rates fall somewhere between 6.720% and 7.388%. And in Presidential election years, there’s traditionally very little interest rate movement between Election Day and the end of the calendar year.

Which means we’re likely to see very little movement in inventory due to interest rate changes and in our season market in the northeast, we’re more likely to see inventory decrease for the holiday season.