What does the Months of Inventory mean in Real Estate?

Rosemarie Ledogar March 26, 2025

What Is “Months of Inventory” in Real Estate?

“Months of inventory” is a way to measure the balance between supply and demand in a real estate market. Specifically, it tells us how long it would take to sell all the homes currently on the market if no new listings were added, based on the current pace of sales.

Think of it like this: If no new homes came up for sale starting today, how many months would it take to sell everything that’s already listed?

🔢 How It’s Calculated

It’s a simple formula:

$Months of Inventory=Number of Active$ Listings/ Divided by the Number $of Homes Sold per Month$

So if there are 600 homes for sale and 100 homes are selling each month:

$600 active listings on the market divided by 100 homes selling each month = 6 months of inventory$

🏡 What the Numbers Mean:

1-3 months = Seller’s Market
- There aren’t many homes available, and buyers are competing — which often drives prices up.
4-6 months = Balanced Market
- Supply and demand are about even. Buyers and sellers are on relatively equal footing.
7+ months = Buyer’s Market
- There are more homes than buyers, which can lead to price reductions and longer selling times.

📍Why It Matters

For buyers and sellers, knowing the months of inventory helps guide strategy:

Sellers: In a low-inventory market, you can price more aggressively and expect quicker offers.
Buyers: In a high-inventory market, you might have more negotiation power and time to decide.

If you're watching the market — whether you’re thinking of buying, selling, or just staying informed — this stat gives you a real-time pulse on how competitive things are.