If you want to understand where the housing market is headed, you should listen to both supply and demand.

On the housing demand front, things remain sluggish with mortgage purchase applications still down 37% on a year-over-year basis. That'll happen when the U.S. housing market absorbs a historic mortgage rate shock just after the Pandemic Housing Boom pushed national home prices up more than 40%.

On the housing supply front, things remain fairly tight nationally. While spiked mortgage rates saw housing demand pull back sharply in 2022, it also saw sellers pull back. According to Realtor.com, new home listings in January were down 5.5% on a year-over-year basis. The idea of giving up a fixed 3% mortgage rate for a 6% rate has many move-up sellers/buyers staying on the sidelines.

So do buyers or sellers have the upper hand?

One of the better indicators might be housing inventory—and its speed of change. At first glance, it might be easy to assume that inventory (i.e., active listings for sale) is simply a measurement of supply, however, it's also very much a measurement of demand. See, if buyers pull back, and homes sit on the market longer, that can increase inventory levels (currently up 65.5% on a year-over-year basis) even if new listings (currently down 5.5% on a year-over-year basis) decline.

Let's once again take a closer look at inventory data in the nation's 400 largest markets.

View this interactive chart on Fortune.com

The trajectory of inventory over the past year is clear: Up.

Among the 400 largest markets tracked by Realtor.com, 370 markets saw inventory (i.e. active listings) jump between January 2022 and January 2023. Nationally, total inventory levels spiked 65.5% from 378,189 active listings in January 2022 to 625,875 active listings in January 2023.

What does this inventory jump mean?

It indicates that the power dynamic has shifted, to a degree, from sellers (who essentially had all the power during the Pandemic Housing Boom) towards buyers. In places where inventory spiked the most, in particular overheated markets like Austin (up 260% over the past year) and Salt Lake City (up 293%), that shift of power has been dramatic.

View this interactive chart on Fortune.com

While buyers have seen an increase in power relative to the frenzied spring 2022 market, it doesn't mean we've shifted into a buyers' market. One of the reasons being, after all, this inventory jump hasn't taken us back to a balanced market.

In fact, we're far below pre-pandemic inventory levels: Active listings on Realtor.com in January 2023 were 43.6% below the 1.1 million active listings in January 2019.

In theory, a market with inventory above pre-pandemic levels has seen the power dynamic shift dramatically in buyers' favor. Markets with inventory levels far below pre-pandemic levels, on the other hand, have seen less of a dramatic shift.

View this interactive chart on Fortune.com

Among the country's 400 largest housing markets, just 15 are back to pre-pandemic (i.e., 2019) inventory levels. That includes overheated markets like Boise, Idaho, and Logan, Utah. The searchable chart (in alphabetical order) above displays those 15 markets.

These 15 markets, in theory, are at higher risk of home price declines in 2023. But, according to CoreLogic, that shouldn't raise an alarm.

“Some exurban regions that became increasingly popular during the COVID-19 pandemic saw prices jump and affordability erode at the time, but these areas are now seeing major corrections” wrote Selma Hepp, chief economist at CoreLogic, in her latest outlook. "The market will likely see year-over-year declines in some [overheated] markets. Although it may raise alarm bells for some pundits, the drop will simply be indicative of over-inflated home values returning to normal."

View this interactive chart on Fortune.com

Among the country's 400 largest housing markets, 385 markets remain below pre-pandemic inventory levels. The searchable chart (in alphabetical order) above displays those 385 markets.

Researchers at Morgan Stanley don't think tight inventory will prevent 2023 home prices declines. That said, a lack of inventory coming online should prevent an actual housing crash.

"Although supply doesn't keep home price growth floored at zero, we do believe it prevents home price declines from becoming too large" wrote Morgan Stanley researchers in their November report.

Want to stay updated on the U.S. housing market? Follow me on Twitter at @NewsLambert.

This story was originally featured on Fortune.com

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