Months of supply shows us the relationship between inventory and sales. It measures a moment in time. If nothing else were listed and the current rate of sales continued – how long would it take for everything to sell? More sales and fewer homes for sale means lower months of supply.
For example: There are 100 homes for sale and on average, we are selling 20 homes a month – Months of inventory would be 5. (100 homes for sale/20 sales a month = 5 months).
If months of inventory falls below three months, it is a Seller’s market where Home Buyers often have to compete for listings. Three to six months of inventory would be considered a balanced market while anything above six months favours a Buyer.Posted by Chris Perkins on