Welcome to “The Scale”. We’ll be taking a look at inventory absorption in different micro-markets around the City, and from the data, determine whether each neighborhood is a buyer’s market, a seller’s market, or in balance.
What type of market is it? It's time to judge.
How do we do this? The first thing we do is find out how many active listings there are in a particular neighborhood. Then we find out how many homes are selling on a monthly basis in that same neighborhood. We divide the active listings by how many homes sell in a typical month, and this tells us how many months of inventory exist in that neighborhood.
What does “months of inventory” mean? This means that if new listings were to cease coming on the market immediately, it would take this many months for all of the existing inventory (or active listings) to sell off. For example, if we find out that Nob Hill has 47 active listings, and an average of 10 sales take place during a typical month, this would mean that there are 4.7 months of Nob Hill inventory sitting out there. Thus, if no new listings hit the market in Nob Hill, it would take 4.7 months for that inventory to absorb (sell).
How many months of inventory are in your neighborhood?
“So what”, you’re thinking – why does this matter? Read the rest of this entry ?
