Whether rising levels of home inventory result in more sales depends on the cause of the increased inventory. Market activity is more likely to pick up when homes are priced right and located in desirable areas, rather than when overpriced homes flood the market. If home prices remain higher, buyers may still hesitate to act unless mortgage rates come down. Affordability, after all, is a paycheck-to-payment calculation, and the numbers need to work, whether that’s achieved through lower home prices, lower mortgage rates, or higher incomes. 

Nevertheless, our analysis shows that as new listings increase, buyers can more easily find a home better than what they already own and that increases transactions.

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