Months of Inventory, what does it mean, and why you should be following it.

There are many telling factors in today’s real estate market that will let you into the secret world of real estate.  One of the closely watched factors that we track at Young Realty is Month’s of inventory.  It lets you quickly interpret the type of market you are in and whether you should be buying or selling.

A typical healthy balanced market will have between a 5-9 month window of real estate inventory.  What this means is that if no other home ever came on the market, all the current homes on the market would sell within 5-9 months in a healthy balanced market.

This gauge will allow you to track where to look for great deals if you are buying and when the right time to sell is to maximize your profits.

Let’s take a look at some real life examples to let you understand what we mean.  Toronto, for example, as of April 2012 the months of inventory is at an all time low of 1.9 months.  What this means is that if no other homes came on the market, the current supply would run out in 1.9 months, well below the healthy gauge.  That means, there is more demand then supply, driving prices up, creating bidding wars and ultimately is what we call a “seller’s market.”  On the other hand, the U.S. real estate market has 46 months of inventory according to estimates from Standard & Poor’s Rating Services based on first-quarter 2012 data.  What this means, is that if no other home came onto the market, the existing inventory would take approximately 4 years to sell, the is what is called a “buyer’s market.”

If you are thinking of selling, now is the time in Toronto, if you are looking to buy, take a look at U.S. property, but be very cautious, they are in for a very long and slow turn around time.

Months of Inventory can be tracked by signing up to our monthly newsletter which gives a summary of the Month’s of Inventory along with many other useful tips and tricks when it comes to real estate investing, buying, and selling.

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