Calculating the available supply of properties, often referred to as “months of supply,” offers a crucial metric for understanding market dynamics. This calculation involves dividing the number of active listings by the average number of properties sold per month. For instance, if a market has 100 active listings and an average of 20 sales per month, the market has five months of supply. This metric can be further refined by segmenting properties based on type, price range, or location for a more granular market analysis.
Understanding market supply provides valuable insights for both buyers and sellers. A high months of supply suggests a buyer’s market, characterized by greater negotiating power for purchasers and potential price reductions. Conversely, a low months of supply indicates a seller’s market, where sellers often enjoy multiple offers and rising prices. Historically, tracking supply trends has allowed for more informed decision-making in real estate investment and development, contributing to more stable market conditions.
