One of the statistics often cited in real sales reports is “Months Supply of Inventory” or “Months of Supply” (MOS). Today we will take a moment to explore and explain this term.
Months of supply is one of the easiest real estate statistics to understand. Simply put; at our current rate of sale, if no new properties came to market, when would we run out of homes to sell. While this may seem overly simplistic, it is 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 sales quantity. The same statistic can be reported annually as well. Simply consider, if we have 50 homes for sale currently and we sold 10 homes last month then we would have 5 MOS.
The Greater Chattanooga market ended 2016 with 3.9 Months of Supply. This is in sharp contrast to 2015 when our market was standing at 5.2 MOS and 2012 when we were double the current rate at 8.3 MOS as the attached graph reflects.
To put this statistic into perspective, when a market has 0-4 MOS then it is considered a “Sellers’ Market”, 4-6 MOS is considered a “Balanced Market” and 7 Months + is 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 will find that some parts of our market have been in a Sellers’ Market for more than a year and 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 we see prices moving up and conversely when MOS is increasing then we will 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 are interested in the current supply in your neighborhood, call on 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. Go to www.GCAR.net for more information.