Are you planning to buy or sell a home anytime soon? If so, you may have heard the term "months of inventory" and wondered what it means. Let’s take a look at the impact of a low-inventory market on buyers, sellers, and real estate investors.
Defining the Market Types
First, let's define what "months of inventory" means. It refers to the amount of time it would take to sell all the homes on the market based on the current sales pace, assuming no new listings are added. A balanced housing market typically has around 4 to 6 months of inventory.
In a balanced market, there's a healthy balance between buyers and sellers. Buyers have a reasonable number of choices without an excessive oversupply of homes, while sellers have a decent pool of potential buyers without facing intense competition or extended listing periods.
However, a low-inventory market with fewer than 4 months of inventory, is often considered a seller's market. This means there's limited supply and high demand, potentially leading to rising prices and faster sales.
On the other hand, a market with more than 6 months of inventory may be considered a buyer's market. This means supply exceeds demand, potentially leading to slower sales and more negotiable prices.
How does the current Seller’s Market affect Buyers and Sellers?
For buyers, this can result in an extended home search and disappointment. Many homes sell extremely fast and even above the asking price, leaving buyers with little room for negotiation.
For sellers, being in a seller's market can be exciting, but it's also challenging. While they may sell their home faster for a good price, the struggle begins when they need to find a new home that fits all their needs within their specific time frame while dealing with higher interest rates.
Real estate investors can take advantage of a low-inventory market by improving their existing property portfolios. With rising property prices, it's a great time to sell investment properties that aren't performing as well as others. This can help them recover costs and potentially make a profit sooner than anticipated.
What’s the Takeaway?
A low-inventory market can have a significant impact on buyers, sellers, and real estate investors. It's essential to understand the current market conditions to navigate the market successfully. Give me a call and we can discuss the specific dynamics of your neighborhood.
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