Housing inventory measures how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales. For example, if there are 300 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 3-month housing supply. This is because it would take 3-months to sell all the homes currently listed for sale.
A buyer’s market is anything more than 6 months.
If the inventory numbers are higher than 6 months, buyers have more negotiating power than sellers. In that case, home prices are very likely to move lower, and sellers will most likely accept an offer for less than the listing price.
A seller’s market is anything less than 6 months.
If the inventory numbers are less than 6 months, sellers have more negotiating power than buyers. In that case, home prices are very likely to move higher, and buyers will most likely be competing with multiple offers (in some cases, dozens of offers), on the house they want.
Will it become a buyers’ market anytime soon?
Not likely. That’s because inventory levels are currently 1.6 months across the country, according to the National Association of Realtors. That places us very much in seller’s market territory. In many markets, inventory levels are even lower than that! Over half of homes sold in the past month were on the market for less than a month. This means that even if conditions improve considerably, and we go from perhaps 1.6 months of supply to 2.6 months of supply, we’d still be very much in seller’s market territory. In fact, it may take several years for the housing supply to increase enough to meet demand.
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