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
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