Home prices in Portland, Oregon, are soaring.

On a monthly basis, the local newspaper catalogs homes that sold above list price. The latest installment includes 34 homes that sold for 15% to 42% over list price in April.

Portland isn't the only city that's seeing this trend. Nearly two dozen other major metropolitan areas are experiencing rising prices.

If you're looking for an explanation, look no further than the inventory of homes for sale.

A line chart of monthly housing inventory.

Data source: Federal Reserve. Chart by author.

As a general rule, home prices rise when the number of homes for sale equals less than the previous six months' worth of actual home sales in that market. So, if there are 1,000 homes for sale in a particular city and 500 homes sell each month, the inventory is equal to two months' worth of sales.

The latest figure in Portland is 1.6 months, which is well below the six-month threshold. Across the country more generally, the supply of homes for sale equals 5.7 months' worth of sales.

The nationwide housing shortage isn't as acute as it is in Portland, but it's still low enough to likely fuel a continuing climb in home prices this summer.

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