What is Months of Inventory?
Months of inventory (also called months of supply) measures how long it would take to sell all currently listed homes at the current pace of sales, assuming no new listings are added. It is one of the most widely used indicators of real estate market conditions, indicating whether a market favors buyers, sellers, or is balanced.
How to calculate
Months of Inventory = Active Listings / Monthly Closed Sales
Example: 1,500 active listings / 300 sales per month = 5 months of inventory
What the numbers mean
Under 4 months: Seller's market. Demand exceeds supply. Prices rising.
4-6 months: Balanced market. Neither buyers nor sellers have a significant advantage.
Over 6 months: Buyer's market. Supply exceeds demand. Prices flat or declining.
Granular analysis
Overall market months of inventory can be misleading. Luxury homes might have 12 months of inventory while starter homes have 2 months — same market, very different conditions. Calculate months of inventory for your specific price range, property type, and neighborhood to get actionable data.
For investors and wholesalers
Months of inventory directly affects your disposition timeline and pricing strategy. In a 2-month supply market, your deal should move within a week. In an 8-month supply market, plan for a longer marketing period and tighter pricing. Tracking months of inventory over time also helps you anticipate market shifts: if supply has been increasing for 6 consecutive months, the market is cooling regardless of what prices are doing today.