If you read reports on the real estate market in various cities across the nation, including the latest RRG Market Report about the local Portland market, you’ll run into the phrase “months of inventory.”

Months of Inventory, defined

The current total number of homes for sale, compared to the average number of homes that have sold per month over the past year.

What Does “Months of Inventory” tell us about the current market?

If there are 1,000 homes for sale and only 100 homes have sold per month, there are 10 months’ inventory. You’re in what is commonly called a buyer’s market. Homes remain on the market longer.

During a buyer’s market, you’ll see price reductions and sellers are also more likely to offer concessions.

 If there are 1,000 homes for sale, selling at a rate of 500 homes per month, there are only 2 months’ inventory, and you’re experiencing a seller’s market. Homes generally get multiple offers within days of being listed, and remain on the market for a very short time. Buyers are likely to be bidding against each other to “win” the home, and as we’ve seen recently in the Portland real estate market, many will waive contingencies, such as the home inspection (we do not recommend this, regardless of whether it’s a buyer’s or seller’s market)

In a seller’s market, prices begin rising and sellers are not as likely concessions.

If there are 1,000 homes for sale and they are selling at a rate of about 166 a month, it equals 6 months’ inventory, and we call that a balanced market. In this case, supply is line line with demand, you’ll find approximately 6 months’ worth of inventory. Correctly priced homes sell, but not as quickly.

In a balanced market, prices may rise, but slowly; buyers may be able to get small concessions.

Right now Portland has approximately 2 months’ worth of inventory. I’d be glad to talk with you about what that means to you as a buyer or seller, and how you should plan your strategy for success.

Contact me and I’ll be happy to answer all your questions.