What is housing inventory, and what can it tell us?
Housing inventory, put simply, illustrates the levels of supply and demand in the housing market.
The number represents months, or days, it would take to completely sell all the homes that are currently listed for sale, based on the sales activity in that given area at that given time.
You can calculate months of inventory by dividing active listings in a period by the number of sales in that same time period.
You know it is a seller’s market when there are 4 months/120 days or LESS of inventory.
You know it is a buyer’s market if there are 6 months/180 days or MORE of inventory.
You know it is a balanced market if there are between 4 and 6 months (120-180 days) of inventory.
Market indicators like this help real estate agents assess how to price homes, how to choose what to offer, and how quickly a buyer may need to make an offer, or a seller may need to accept one.
Buyer’s and Seller’s markets are exactly what they sound like. A buyer’s market is best for buyers, and a seller’s market is best for sellers. This is because the market conditions make what they have (money to spend, or a house to sell) very valuable, and they have less competition for that asset at the time.
As of 2022, we are currently in a seller’s market. This means that seller’s are in a unique position where there are limited houses for sale, so they can ask for higher prices, better conditions, and have their choice of potential buyers.
Markets can change often, and are regularly ebbing and flowing with other conditions like interest rates, governmental affairs, and even global affairs. Because of this, buyer’s and seller’s markets are not always a perfect indicator of how easy or difficult it will be to buy or sell a home.
But typically, knowing how much inventory there is in your area at the time is a great way to predict, at least partially, what kind of competition you will be looking at.
