One of the statistics often cited in real estate sales reports is “Months Supply of Inventory” or “Months of Supply” (MOS). This week, we’ll take a moment to explore and explain this term.
Months of Supply is one of the easiest real estate statistics to understand. Simply put, it quantifies when we would run out of homes to sell at our current rate of sales if no new properties came to market. While this might seem overly simplistic, it’s the heart of the number.
Most real estate sales statistics are reported on a monthly basis. In the case of MOS, the current number of homes available for sale are divided by the past month’s total quantity of sales. The same statistic can be reported annually as well. If we currently have 50 homes for sale and we sold 10 homes last month, then we would have five MOS.
The Greater Chattanooga market ended 2016 with 3.9 MOS. This is in sharp contrast to 2015, when our market was standing at 5.2 Months of Supply, and 2012, when we were double the current rate at 8.3 Months of Supply, as the graph at right reflects.
To put this statistic into perspective, when a market has zero to four MOS, then it’s considered a “Sellers’ Market.” Four to six MOS is considered a “Balanced Market” and seven or more months are termed a “Buyers’ Market.”
In each case one, is gauging the number of homes available for sale relative to the number of buyers. Given these descriptions, our market moved from a more Balanced Market to a Sellers’ Market this past year.
As you drill down to specific neighborhoods and communities, you’ll find that some parts of our market have been in a Sellers’ Market for more than a year, while others are still in a balanced situation.
One of the reasons MOS is important to watch is its direct relation to home prices. When we have declining MOS, then we’ll see prices move up; conversely, when MOS is increasing, then we’ll see price increases stall and ultimately decline.
While online platforms can be helpful in gauging price trends, nothing is more accurate than an experienced Realtor who studies the local market statistics. If you’re interested in the current supply in your neighborhood, call a member of GCAR today.
The Greater Chattanooga Association of Realtors is The Voice of Real Estate in Greater Chattanooga. The Association is a regional organization with more than 1,700 members and is one of more than 1,400 local boards and associations of Realtors nationwide that comprise the National Association of Realtors.
GCAR services Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. Visit www.GCAR.net for more information.