Months Supply of Inventory is commonly used to determine the health of a particular real estate market. It is the measure of how many months it would take for the current inventory of homes on the market to sell/deplete (assuming no new inventory is put on the market), given the current pace of home sales.
● A Seller’s Market = 0-4 Mos.
Low supply of inventory, giving sellers more control to set terms, raise their listing price.
● A Balanced Market = 5-7 Mos.
A healthy supply of inventory with a good balance of both buyers and sellers.
● A Buyer’s Market = 8+ Mos.
Supply is high, giving buyers more negotiating power
Calculated by dividing the number of active listings on the market within a specified timeframe by the number of listings sold or pended during the same time period. The best practice is to calculate MSI on six months to a year’s worth of listings to get a more accurate idea of supply over a longer period of time. Home sales vary based upon the season so measuring just one month can skew results.
NOTE: One may segregate this market further by calculating MSI for homes listed and sold within a specific price point during a specific time frame