Months Supply of Inventory and why that matters to you Thursday, February 09, 2017
Months Supply of Inventory isn't a term that everyone is familiar with, and there is a reason for that. Unless you are looking to buy or sell and home, Months Supply of Inventory doesn't really have any effect on you. For those looking to buy or sell on the other hand, this is a pretty important number that your real estate professional can give to you. Why is this something you might need to know?
When you are in the market for a new house, it is always beneficial to understand if you are in a buyers market or a sellers market. Understanding what type of market your area is currently experiencing can help you understand what type of competition you might deal with when putting in offers on homes and how much time you have to make your decisions. The number that seems to be the standard for determining what type of market you are in is 5 months. If the months of supply in your area in in excess of 5 months, you are in a buyers market. This simply means that there is a surplus of homes on the market so buyers have tons of choices. Having so many choices will typically benefit the buyer because they have more power in negotiating prices. The higher the inventory of properties for sale, the lower prices are driven down. This translates into a great time to buy your dream house, but not such a great time to sell. When inventory falls below 5 months, which is currently happening in a lot of cities in Southeastern Michigan, with many cities in Macomb County falling below 3 months of inventory, this is very much a sellers market. This means that sellers are fewer in numbers than buyers and can command a premium on price. Knowing these trends is something your Realtor will know and can guide you to the best time to list your home. Keep in mind, there are always exceptions to the rule. Certain cities seem to be in demand year round, regardless of what happens in markets surrounding them. Ask your Realtor for some insight on your market and you would be amazed at how much data is actually out there for your benefit!