What are “Months of Inventory” and How Will It Affect Me?
Months of inventory: the amount of time (or months) it would take for all current MLS® listings to sell given that no new listings come onto the market.
This is calculated by dividing the total number of homes for sale by the total number of homes sold for a given period of time – usually done on a monthly basis.
For example, if there were 3000 listings on Calgary’s MLS® in August and 1000 of those sold, then there would be 3 months of inventory if only 1000 homes were to sell in both the following September and October. See our Calgary Real Estate Market Updates here.
In general, the greater the months of supply, the more sellers there are than buyers – also known as a buyers’ market. On the other hand, the lower the number the more buyers there are than sellers and it would be more of a sellers’ market.
When there are many more listings available than there are buyers, average benchmark price gains tend to slow to a halt – if not decline – as competition between sellers increases and some are willing to drop the price to get the transaction done.
For example, throughout 2016 months of inventory for the apartment sector averaged at six, putting a large downward pressure on benchmark prices for condominium units across the city.
In such a market, it may be a better to hold onto your condo until the market bounces back if possible so that you don’t lose a substantial amount of cash!
Also it is realistic to not expect your home to sell overnight in such a market. It may take several weeks or months to finally sell your home, however, you may have to adjust your price expectations in order to do so (but not always!).
When there are few listings available and a ton of buyers looking to make a move, average benchmark prices tend to gain ground as sellers now may receiving several offers for their home.
As a seller, you’ll want to consult a professional and experienced real estate agent for a Competitive Market Analysis to maximize the listing price comparative to other similar properties for sale.
Also, consider doing a little work on curb appeal, staging and other things of the sort to create that little extra sparkle to your home for viewers – it could result in an offer that you can’t refuse!
As a buyer, you’ll also want to ask your agent about how to navigate an offer properly on a home that may be receiving a handful from other prospective buyers. You should be ready to act quick and make a good offer as there is no time to waste. That includes being pre-approved for a mortgage and having the rest of your finances sorted.
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