Measuring Home Supply and Demand
Months of Supply = Number of Homes on Market ÷ Number of Homes Sold Monthly
Often times when hearing news about a local real estate market, you’ll hear something about the “total month supply of homes”. Month of supply is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. This simple equation can also indicate whether a specific Real Estate market favors buyer or sellers. For instance, if there are 40 homes on market and 10 homes selling each month, this equals a 4 month supply of homes for sale.
A market favoring sellers usually has less than 6 months of supply. If there is more than six months’ supply, there is an excess of homes for sale, and this would in turn favor buyers.