Understanding Months’ Supply of Inventory in Real Estate

Are you buying or selling a home and confused about the term “months’ supply of inventory”? Simply put, it’s a metric that measures the number of months it would take to sell all homes on the market, given the current pace of sales. Let’s delve into why it’s important.

Months’ supply of inventory indicates the state of the housing market. A low supply (less than six months) is a seller’s market, meaning there are more buyers than homes available. This can lead to bidding wars and higher prices. Conversely, a high supply (more than six months) is a buyer’s market, giving buyers more negotiating power and lower prices. And while we are up to around 3 months of inventory (up from 1.2 months of inventory in 2022) we still see a shortage of available homes.

Knowing the months’ supply of inventory can help you make informed decisions when buying or selling a home. As a buyer, you may need to offer above asking price or compete with other buyers in a seller’s market. In a buyer’s market, you can ask for more concessions from the seller. As a seller, you can price your home higher in a seller’s market, but may need to be more competitive in a buyer’s market.

Remember market conditions and stats can vary wildly from market to market, state to state. Making decisions based off national averages could set you up for failure. While market specifics vary, months’ supply of inventory gives you a general idea of whether you’re in a buyer’s or seller’s market. Understanding the state of the market can help you make informed decisions that align with your real estate goals. #closedbyclough

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