| As with new housing, the overall availability of existing homes on the market has already been tighter than usual, contributing to strong upward price appreciation. With household growth and demand for housing continuing to run strong, Harvard analysts don’t expect sales to drop off enough to alleviate lean housing inventories. “During past cycles, new construction activity did not retreat until the months’ supply had reached at least eight months,” the report says. “For current inventory to exceed even a six-month level, though, new home sales would have to drop by more than a third — a magnitude of decline not seen since interest rates skyrocketed in at least some markets. This makes a sharp inventory correction unlikely.” In the past, excessively high inventories have been the problem for the industry, and that worked to the benefit of consumers looking for favorable prices. In April, the most recent month for which home sales figures are available, there was a 4.3-month supply of new homes for sale and a 4.6-month supply for re-sales, both on the lean side. In order for current housing prices to tumble, even in metropolitan areas where they have been proceeding at a “blistering pace,” Harvard says, there will need to be concentrated job losses. “In the event of such an employment drop, homes for sale often flood the market at a time when few are in a position to buy.” But the pace of new job creation has recently improved to a furious pace, as employers added almost one million workers to the payroll in just the last three months. “With a resumption of job growth,” the report says, “overheated housing markets may well see only modest house price corrections.” | 
