The third graph uses the Altos inventory data and shows the trend comparing to the same week in 2020 and 2019. The dotted red line is the recent trend compared to 2020 – and at the current pace, inventory will be up compared to 2020 in September. The dashed grey line is comparing to 2019, and based on the current trend, it is possible inventory will be back to 2019 levels in the first half of 2023. However, if inventory growth stalls, then it might take much longer to reach normal inventory levels.
…The current situation is very different from the post-bubble period. Following the housing bubble, many homeowners were forced to sell because they had little or no equity in their homes, and loans that they could no longer afford when teaser rates expired. This led to a huge surge in inventory starting in late 2005.

Now most homeowners have substantial equity, and fixed rate loans with low interest rates. This suggests there will be little forced selling, even if prices decline in some areas.

Some people will always need to sell due to death, divorce, moving for work, etc., and some speculators might be forced to sell, but it is unlikely we will see a huge surge in inventory like in late-2005.

I’ve been expecting inventory to return to 2019 levels in early 2023 with low demand and some normal levels of new listings. However, it is possible that it might take much longer to return to more normal inventory levels – inventory will tell the tale!