I’m a numbers geek so this sorta thing gets me excited, but I’ll try to keep this brief
What is Months of Inventory?
Months of inventory is a real estate phrase that is used to describe approximately how long it would take the current inventory (number of homes currently for sale) to completely sell. In other words, if no other homes were to be listed for sale, how long would it take for all the homes currently listed to sell?
Why is it Important?
On the surface to the average consumer, months of inventory is a worthless metric, but what it describes is how difficult it might be for you to be able to find a home that you both love & won’t have to compete for.
As a general rule, the real estate market is considered to be balanced when there is 6 months of inventory available. Anything less than that is considered a “Seller’s Market” and anything more is considered to be a “Buyer’s Market.”
Example of Months of Inventory in Action
If you want to understand the calculation, let’s take the following example. Let’s say there have been 120 homes that have sold in the past 12 months. That would average to 10 homes sold per month.
If there are 60 homes for sale at the moment, we would then have 6 months of inventory available (because at 10 homes per month, it would take 6 months to sell all 60 homes). If the inventory dropped to 30 homes, we would then have 3 months of inventory. At this level, it’s considered a Seller’s Market because Buyers are going to have to fight over the homes that are currently for sale.
Historical Examples of Months of Inventory in St. Louis
Do you may recall the heartbreaking recession from 2008? The chart below illustrates what the St. Louis housing market did during those years (I chose January of each year to report since the data is from a point in time). You can see that it starts going up from 2008 and then peaks in 2010 when it was terribly difficult to sell a home and many people were unfortunately losing their homes. Home prices have substantially rebounded since 2010 as the amount of inventory declined substantially.
| Year | Months of Inventory * |
| 2007 | 8.1 |
| 2008 | 10.4 |
| 2009 | 10.6 |
| 2010 | 12.4 |
| 2011 | 11.7 |
| 2012 | 8.6 |
| 2013 | 5.3 |
| 2014 | 5.5 |
| 2015 | 4.7 |
| 2016 | 3.9 |
| 2017 | 3.4 |
Key Takeaway
If you are thinking of selling your home, selling when inventory is low reduces the competition you’ll face (your competitors are other homes on the market). You’ll simply have the best chance to sell your home and for the most money when inventory is low.
More Questions?
Still have questions? Let me know below!
* Data is provided by the Mid-America Regional Information System (MARIS) for St. Louis County.