KEY DATA:  Sales: -2.7%; Inventory: +10.5%; Median Prices (Over-Year): +19.1%

IN A NUTSHELL: “Low inventory continues to plague the housing market.”

WHAT IT MEANS:  Ask any realtor and they will say that the housing market is booming.  Yet the National Association of Realtors reported that existing home sales fell in April for the third consecutive month. Only the Midwest posted a gain.  Purchases dropped in the other three regions.  Weakness in the single-family segment accounted for the drop, as condo sales improved slightly. So, is the market weakening?  Hardly.  The problem seems to be inventory, even if it did improve sharply.  Given the sales pace, the number of homes on the market would have to expand by at least fifty percent to ease the problem and that is not likely to happen anytime soon.  As a result, prices continue to surge, especially in the single-family component, which was up over twenty percent from April 2020.  We must be careful comparing the early pandemic months with current numbers, but prices bottomed last May and have soared since then.  At the same time, the number of homes on the market consistently dropped until they bottomed in January.  Essentially, demand is so strong that it will take a major rise in listings to change the condition of the market significantly.    IMPLICATIONS:Is this a housing bubble?  In one sense, yes.  Demand is surging and the major factor driving it, a change in locational preference, is not likely to be able to sustain the current level of activity.  It is unclear how long the desire to escape to lower density locations will be sustained.  When workers start returning to offices, will that depress demand, and if so, by what magnitude?  The proportion of the workforce that will continue to work full-time or part-time remotely is simply unknown.  But to some extent, this locational shift will continue, as preferences are being re-evaluated.  So, demand should be sustained at a higher level than it would have been had the pandemic not hit.  That bodes well for sales and prices.  And it also implies that there will not be an implosion of the market.  The sales pace would have to fall sharply to bring supply and demand more closely together.  In addition, the sales surge is not being driven by financial sector excesses, such as no-down payments, 110% mortgages, no credit checks, ridiculously low teaser rates and make-believe appraisals.The people buying homes have the income and down paymentsas they are often trading one home for another.  And economic growth should remain strong through this year and while next year it may moderate, it is not expected to falter significantly.  So, while the market may be bubbling, it doesn’t appear to be in a bubble that is about to burst.  That doesn’t mean we will not see sales and prices fall.  They might, given how much they have risen.  But the slowdown, whenever it comes, is likely to be more controlled than panicky, which was the case when the last housing bubble exploded.