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Months of Inventory Explained

A common word that gets tossed around frequently in the real estate world is inventory. You might have heard that the amount of inventory in Arlington is really low right now or that it's a seller's market. However, what does that mean and how is that determined?? Well, in real estate, inventory is measured in months and is often referred to as months of inventory or months of supply. Months of inventory represents how long it would take to sell the current active homes for sale based on the current rate of demand assuming no new homes are put on the market. You can calculate the months of inventory by dividing the number of active houses for sale by the number of sold houses over the last month. For example, when checking MRIS today, there are 416 active homes for sale and 146 homes have sold over the past month in Arlington, VA. To calculate the months of inventory, we do the following calculation: 416 Homes for Sale / 146 Homes Sold = 2.85 Months of Inventory Now that we know how many months of inventory there currently are, we need to understand what this number means. Every real estate market varies, but typically 5-6 months represents a balanced market, 0-4 months represents a seller's market, and 7+ months represents a buyer's market. Thus, if the current months of inventory is 2.85 in Arlington, it is clear that it is a strong seller's market. This is not surprising though, since Arlington has been a seller's market over the last few years as there has been an constant demand for homes in the area. So what does all of this mean if you are trying to sell/buy a home this year? Well, if you are trying to buy, expect there to be a lot of competition, higher sale prices, multiple offers, and homes not staying on the market for long. This is why I always tell my clients to get pre-approved by a lender before starting their home search because if they find their dream home before they expect to, they should be in a position to be able to make a strong, confident, and winning offer. If you are on the other side of the spectrum and are trying to sell your home, expect there to be little competition which will lead to multiple offers, a fast sale, and typically higher prices. You now are a real estate inventory expert! To learn more about real estate in Arlington, VA, visit the Live section of our website.

*Photo from @inspire_me_home_decor Intstagram's Account

#RealEstateTip #Inventory

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