Ask anyone who has bought or sold real estate and there are certain terms that are common knowledge; mortgage, interest rates, days on the market and on and on.
But there is one term that most people are not very familiar with and it is a critical number to real estate. REALTORS® watch this data very closely as it determines a buyers’ or sellers’ market and that makes a difference to anyone looking to buy or sell.
Generally speaking, the Months of Inventory is determined by how long it would take to sell all of the homes on the market at the current number of sales for that month. For example; if there are 1,000 homes on the market, and 300 homes close that month, then your Months of Inventory would be 3.3 months. To explain it another way, if no other homes came on the market and the current rate of sales remained the same, it would take 3.3 months to sell all of the homes on the market.
This number changes monthly, but it is a good determination as to the market conditions and what buyers and sellers can expect.
As a general rule, if the Months of Inventory is 6 months or more it is considered a buyers market. Between 3 months and 6 months it is considered a neutral market, the market doesn’t favor buyers or sellers. Less than 3 months and it is considered a sellers market. Needless to say, these numbers make a world of difference to both buyers and sellers.
Given that real estate is an extremely local issue, it is important the your real estate agent understand the numbers for Months of Inventory. Maryland dropped from 5.0 Months of Inventory for February, 2016 to 4.4 Months of Inventory in March, 2016. Both of these numbers are still considered “neutral”, however, the trend is clearly heading towards a sellers market.
Frederick County, Maryland dropped from 4.4 of Inventory in February to 3.8 Months of Inventory in March of this year. Frederick County Maryland is on the cusp of becoming a sellers market. A sellers market will generally result in fewer homes to purchase and higher prices.
If you are thinking of buying or selling, talk to a real estate professional – talk to a REALTOR® – who can give you the information you need to make an informed decision.
As always, if I can help with any of your real estate needs, please feel free to text or call me at 301-712-8808 or email me at RolandLow1@gmail.com