In any given market, inventories fluctuate based on supply and demand considering area and price range. The National Association of REALTORS considers a balanced market to be a six-month supply of homes.
If it takes longer than six months to sell, it is thought to be a buyer’s market and less than six months, a seller’s market. Most buyers and sellers probably feel a balanced inventory is more like three months’ supply of homes.
The inventory of existing homes has been reduced to approximately 1.5 million houses which is 10.3% lower than a year ago. According to the Federal Reserve Bank of St. Louis there are 5.7 months’ supply of new homes currently on the market in the U.S.
Inventory has a direct impact on price. When demand is constant, but…