The housing inventory refers to all the homes that are for sale at any given time within a loca! area. This inventory will swell or reduce at different times. It is an excellent indicator of both how strong the market is and the direction in which it’s going.

The inventory is expressed in a variety of ways, one of which is the total number of homes for sale. Another more useful way of expressing inventory is in how many months or days it will take to sell out the entire inventory of homes at the current rate of sales- (Of course, new homes are constantly coming onto the market so the inventory is never completely exhausted.)

In a very hot market, the time to sell out typically is less than 60 days, sometimes less than 30 days! In a cold market, it’s typically six months and sometimes far longer. When inventory is high, it suggests that there are too many houses on the market and sellers can’t sell—a good rime to find bargains. When inventory is low, it suggests there are too many buyers compering in the market and it will be tough finding a house at a reasonable price—and there may be multiple offers on any bargains.

Also, the trend in inventory is important. Are there month-to-month increases or decreases in inventory? Increases suggest a sagging market; decreases suggest a tightening market where price appreciation is likely. Be sure to check the month-to-month changes going back at least a year or two to get an understanding of where your market really is.

You can get this information from almost any real estate agent. Virtually all real estate boards track market inventory, and an agent can usually give you all the statistics you need just by tapping a few keys on the office computer. This is normally a free service performed in the hope of eventually getting you to list or buy through the agent.
This is an often used but rarely understood statistic. It is derived by comparing the inventory to the rate of home sales. For example, say there are typically around 400 homes sold each month. And the inventory currently consists of 1,600 homes. It will sell out within four months. That’s the maximum time it should take to sell the average home, assuming it shows well, is priced right, and so on.

However, since the average home is by definition in the middle of the pack, you could expect it to sell sooner. Some homes will take four months to sell, others will sell immediately, and the average should be in the middle. Thus, in our example, the average home could be expected to sell within two months. (Note: Not all agents and investors calculate it in this fashion, but instead use the time to sell out the entire inventory for determining how long it will take to sell the average home.)

Again, you can make this calculation after getting the statistics from an agent (see above). The importance of “the time to sell” is that it’s another tool in determining how strong the market is and where it’s headed. Comparing month-to-rnonth “time to sell” going back six months should clearly indicate whether the market is strengthening, weakening, or stagnating.

Also, very short or very long times to sell indicate super heated or deadly cold market conditions.