Months of Inventory: What Does It Mean & Why Should You Care?

If you’re involved in buying or selling a home, you may have heard the term months of inventory. It refers to how how many months it would take to sell all of the homes in a particular area, assuming that no new homes were added to the market. While it may seem like an esoteric term, it can actually have significant implications on the prices of homes in an area and whether buyers or sellers have the most power.

In general, when there are six or fewer months of inventory, it is a sellers market; six months or greater tend to favor buyers. It is important to note that there can be different months of inventory depending on price ranges. For example, houses priced below $1,000,000 may have four months of inventory while houses that are priced above $5,000,000 may have 10 months of inventory.

If you’re buying a home in a buyer’s market, you’ll have a lot of homes to choose from. In these cases, it can help to narrow down your options by looking for particular sizes, floor plans, and neighborhoods. In a seller’s market, you’ll need to act quickly if you find a property you like because competition for it will be high.

When you’re looking to sell your home in a buyer’s market, it will be important to understand that a sale won’t take place overnight and that the house will probably need to be in top condition or sold for a lower price “as is.” On the other hand, in a seller’s market, your biggest issues will probably be setting the list price and determining which offer to accept of the many you’ll receive.

If you’re getting ready to buy or sell a home in the South Bay, I would be happy to talk with you more in depth about what the market looks like in the beach cities and Palos Verdes.