Maybe you have heard a realtor say it, saw it in a video or even asked this yourself, “what is the inventory of homes on the market right now?” Okay…maybe it wasn’t stated in that exact way. Other ways of asking the question could be:
- Is it a sellers' market?
- Is it a buyers' market?
- Is now the right time to buy a home?
- Is now the right time to sell my home?
- What is my competition as a buyer and a seller?
- Has the housing market peaked?
One of the key indicators to monitor is the Housing Months of Inventory for a region. For our purposes, we will dive into the Dallas/Ft Worth region as that is local and where many real estate experts focus on given its rapid growth and stability.
But let’s back up for a few minutes and ask, “what exactly is the housing months of inventory and how is it calculated?” The Real Estate Center at Texas A&M University “estimates the housing months of inventory by dividing the number of current listings in the Multiple Listings Service (MLS) by the average number of sales per month during the prior 12 months.” (recenter.tamu.edu)
In other words, months of inventory presents the supply of homes for sale in relation to the number of purchased homes. So when the math is done, the result gives the number of months it would take to sell ALL properties presently for sale.
Okay…so what does this all mean and what should it be compared to?
- “Buyers’ Market” Over 7 months (Demand for housing is LOW and prices are likely to FALL)
- " Balance" Around 6.5 months
- “Sellers’ Market” Less than 6 months (Demand for housing is HIGH and prices are likely to RISE)
Now, of course, the numbers above are historical and based on averages. I don’t want to give the impression that if you are a buyer, you should wait until the supply is at least 6.5 months to buy because you will be waiting a while…especially in Texas! The last time Texas was above a 3.5 month inventory was back in 2013!
So yes, we are living in a ‘new norm’ at least for the time being. We are seeing historically low inventory numbers and low-interest rates that have remained with us long enough to consider this period a 'normal' period. How long will this be sustained? Not sure...but there is enough value in seeing what the market is doing today, so you have a framework to work from when you consider entering the real estate arena.
This article was written to increase awareness and give consumers the power of data to see what the housing market is doing. Of course, this is not meant to keep you on the sidelines if you are a buyer or a get you into the market if you are a seller.
If now is the time to buy for you personally, go out there and look! (Access to MLS) You may find the home of your dreams and these statistics are rendered meaningless to you. Or if now is the time that you need to sell your home, start the process and get a free Comparative Market Analysis for your home. (Run Quick CMA)
You are under no obligation to buy or sell a home but having an appropriate expectation of what the real estate market is doing provides great value to you. As an educated consumer, you avoid being swayed by the real estate signs, the real estate agent billboards and make it a more objective decision for your. But let's be real...buying a home IS a subjective decision.