WHAT IS HOUSING MONTHS OF SUPPLY?

Housing markets are generally described as either a Buyer’s market or a Seller’s market. These terms reflect the demand (Buyers) for a given supply (Sellers). By measuring these fundamental economic drivers, we can determine which side (Buyer or Seller) of a real estate transaction has more negotiating leverage.

The market for real estate is measured by ‘Months of Inventory or Supply’. This is the time it would take for all current inventory (homes for sale) to sell if sold at the current selling pace without new listings coming onto the market. Months of supply is determined by dividing the total number of homes for sale by the average number of homes sold in a month.

If months of supply is between 5 and 7 months, the market is considered to be healthy and balanced for Buyers and Sellers. Higher months of supply indicate a Buyer's advantage since it is taking longer to sell a home and Sellers will be more willing to lower their price to make a sale. Lower months of supply indicate a Seller's advantage since homes are being sold more quickly due to plentiful Buyers in the market.

The current months of supply is around 3.1 months. This means we are in a Seller’s market and Sellers have stronger negotiating power. If you are considering selling your home, now is the time to determine its market value and list it. Very low interest rates also mean that more Buyer's can afford it and you can take advantage when finding your new home.

Of course, listing a home for higher than market value will likely take longer to sell, even in a Seller’s market. This is why it is very important to list your home as close to market value as you can. Otherwise, you risk it staying on the market for longer than you are willing to tolerate.