Want more housing market stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the ResiClub newsletter. A few days after I launched ResiClub in October 2023, I wrote an article titled “The key housing market metric heading into 2024.” In it, I reaffirmed a point I had also made at Fortune in 2022: that some traditional rules of thumb—i.e., months-of-supply thresholds for what constitutes a buyers’ market versus a sellers’ market—could struggle in this post–Pandemic Housing Boom environment, where there’s downward pressure on prices. For the time being, I suggested that an easy-to-create and useful metric for housing stakeholders to follow—one that helps gauge short-term pricing momentum and whether downside risk might manifest—is a local market’s level of active inventory compared to that same market’s inventory level in the same month of pre-pandemic 2019. The thinking was that markets where active inventory remains well below 2019 levels would still exhibit some tightness, while those where inventory has surged back to or above pre-pandemic 2019 levels would experience a shift in the supply-demand equilibrium more in favor of homebuyers. Heading into 2025, I recreated that analysis showing the dynamic was still holding true. Fast-forward to today, and this particular data cut still proves useful (overtime ResiClub believes its usefulness will diminish—just not right now). Generally speaking, housing markets where active housing inventory for sale has surged above pre-pandemic 2019 levels have experienced weaker or softer home price growth (or even outright home price declines) over the past 36 months. Conversely, housing markets where active housing inventory for sale remains far below pre-pandemic 2019 levels have, generally speaking, experienced more resilient home price growth over the past 36 months. Indeed, just look at the scatter plot below showing “Shift in home prices since their local 2022 peak” Vs. “active inventory for sale now compared to the same month in 2019” for the nation’s 250 largest metro area housing markets. Below is the same scatter plot as the one above, only its color scheme is adjusted to show which markets have LESS active inventory now than in 2019 (BROWN) and which markets have MORE active inventory right now than in 2019 (GREEN). Click here for an interactive version of the scatter plot below. To see if this data cut still proves useful, let’s swap out “home price since their local 2022 peak” for “year-over-year home price shift.” The answer is yes—the trend still holds. (Recently, both the Wall Street Journal and John Burns Research and Consulting created their own versions of this longtime ResiClub scatter plot.) Below is the same scatter plot as the one above, only its color scheme is adjusted to show which markets have LESS active inventory now than in 2019 (BROWN) and which markets have MORE active inventory right now than in 2019 (GREEN). The current regional bifurcation—greater weakness in Sun Belt and Mountain West boomtowns and greater resiliency in the Northeast and Midwest—shouldn’t be surprising to ResiClub readers. Given that we cover that regional bifurcation frequently, we’re not going to spend time in this piece discussing what’s driving that bifurcation. Instead, let’s discuss why this particular data cut is useful right now, and why overtime it could become less useful. This data cut’s usefulness—right now—explained During the Pandemic Housing Boom, housing demand surged rapidly amid ultralow interest rates, stimulus, and the remote work boom—which increased demand for space and unlocked “WFH arbitrage” as high earners were able to keep their income from a job in, say, NYC or L.A., and buy in, say, Austin or Tampa. Federal Reserve researchers estimate “new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand.” Unlike housing demand, housing stock supply isn’t as elastic and can’t ramp up as quickly. As a result, the heightened pandemic era demand drained the market of active inventory and overheated home prices, with U.S. home prices rising a staggering +43.2% between March 2020 and June 2022. At the height of the Pandemic Housing Boom in spring 2022, most of the country had 60% to 75% less active inventory than in 2019. Once mortgage rates spiked, national housing demand cooled off. While many commentators view active inventory and months of supply simply as measures of “supply,” ResiClub sees them more as proxies for the supply-demand equilibrium. Large swings in active inventory or months of supply are usually driven by shifts in housing demand. For example, during the Pandemic Housing Boom, surging demand caused homes to sell faster—pushing active inventory down, even as new listings remained steady. Conversely, in recent years, weakening demand has led to slower sales, causing active inventory to rise in many markets