1. What Is Real Estate Inventory?

Months Inventory, also known as Months of Supply, is a key real estate metric that measures how long it would take to sell all current active listings at the current sales pace. It provides valuable insights into market conditions and housing supply.

2. How Does The Calculator Work?

The calculator uses the real estate inventory formula:

Where:

• \( \text{Active Listings} \) — Number of properties currently for sale in the market
• \( \text{Monthly Sales} \) — Number of properties sold in the past month

Explanation: This calculation shows how many months it would take to sell all available properties if no new listings were added, based on the current sales rate.

3. Importance Of Months Inventory

Details: Months Inventory is crucial for understanding market dynamics. A low number indicates a seller's market with high demand, while a high number suggests a buyer's market with excess supply.

4. Using The Calculator

Tips: Enter the total number of active listings and monthly sales figures. Both values must be positive numbers, with monthly sales greater than zero for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What Is Considered A Balanced Market?
A: Typically, 5-6 months of inventory indicates a balanced market where supply and demand are roughly equal.

Q2: What Does Less Than 3 Months Inventory Mean?
A: Less than 3 months indicates a strong seller's market with high demand and limited supply, often leading to price increases.

Q3: What Does More Than 7 Months Inventory Mean?
A: More than 7 months suggests a buyer's market with excess supply, potentially leading to price reductions and longer selling times.

Q4: How Often Should This Be Calculated?
A: Monthly calculation provides the most current market insights, but quarterly analysis can show seasonal trends.

Q5: Are There Limitations To This Metric?
A: This metric doesn't account for new listings entering the market or seasonal fluctuations, so it should be used alongside other market indicators.