Is It a Buyer’s Market or a Seller’s Market?
If you’ve ever wondered whether it’s a buyer’s market or a seller’s market in your area, one of the best indicators is something called Months of Inventory. This real estate metric helps measure housing supply compared to buyer demand, offering insight into market balance, pricing trends, and negotiating power.
Months of Inventory looks at how long it would take to sell all the homes currently on the market if no new listings came up and buyers kept purchasing at the same pace they are right now.
It’s calculated by dividing the number of active listings by the number of homes going under contract each month. So, for example, if there are 200 homes for sale and buyers are putting 50 under contract each month, that’s 200 divided by 50, which equals four months of inventory. If buyers are only putting 20 under contract each month, it’s 200 divided by 20, which gives us ten months of inventory.
In general, less than three months of inventory is considered a low-inventory market, meaning sellers usually have the upper hand and competition among buyers tends to push prices up. Around four to six months is typically seen as more balanced (where neither buyers nor sellers have a strong advantage and homes tend to sell at or near list price without as much urgency) and anything above six months usually signals a higher inventory market, where buyers may have more options and more negotiating power.
What makes Months of Inventory especially interesting is that it does not move the same way everywhere, even in areas that are geographically close. Markets just a few miles apart can have very different inventory levels, and those differences often come down to who is buying, who is selling, how the housing stock is used, and how dense the housing is.
Take Bensalem Township and the Temple University section of Philadelphia. These two areas aren’t that far from each other, but they function very differently. Right now, in Bensalem we’re sitting around one month of inventory, which points to very strong demand and limited supply. By contrast, near Temple, were around 8ish months of supply. That’s partly because the area is dominated by student housing and investor-owned properties, where leasing cycles and academic calendars drive activity. It’s also because the housing stock is much denser. There are more units per block, which leads to more turnover and more active listings at any given time. Even with steady demand, it simply takes longer for the market to absorb what is available.
This is the sort of thing I pay attention to when I’m preparing an appraisal report. I look at Months of Inventory in the broader area, I look at it locally, I look at the trend over time, and I look at where it stands today. Each piece helps explain what might not be obvious at first glance.
All of this helps shape how I develop a value opinion.
If you're trying to understand what the market is doing in your area, or how it might be affecting your property's value, I’m always happy to take a look and walk through it with you.
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