Months of inventory (MOI) is a key metric in real estate that indicates how long it would take to sell all the homes currently on the market if no new homes were listed and the current sales pace continued. It’s calculated by dividing the number of active listings by the number of homes sold in a given month.
For example, if there are 100 homes on the market and 20 homes sold last month, the months of inventory would be 5 months (100 active listings / 20 sales per month = 5 months of inventory).
What Does Months of Inventory Indicate?
Seller's Market: Generally, less than 4 months of inventory indicates a seller’s market, where there are more buyers than available homes. In this scenario, homes tend to sell quickly, and sellers may have the advantage in negotiations.
Balanced Market: Between 4 to 6 months of inventory typically indicates a balanced market, where the number of buyers and homes for sale is relatively even. Neither buyers nor sellers have a significant advantage.
Buyer's Market: More than 6 months of inventory suggests a buyer’s market, where there are more homes available than buyers. In this situation, homes may take longer to sell, and buyers may have more negotiating power.
Understanding months of inventory helps both buyers and sellers make informed decisions in the real estate market. For buyers, it can signal how much competition they might face, and for sellers, it can guide pricing and marketing strategies.
Want to know where we are currently in our Months of Inventory? We send out updates on our social media every month OR just shoot us an email, we would be happy to chat!
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