So many times when selling a home I have been asked by a home owner to come by and present my ideas for marketing and getting a home sold. What I always find useful is the CMA or Current Market Analysis, but what this lacks is that while it shows a range or price that we may feel the market is telling us that Buyers are paying for comparable houses in an area, the CMA does not address Days on Market or Housing Inventory.
Odds of selling
Odds of selling
Monthly housing inventory or also called “Absorption rates” are very helpful to make sure that Seller expectations to be realistic. The calculation for months of housing supply is simple. We take the number of sales in a given area over 3, 6, or 12 months and divide by the number of months we are using. This creates the average sales per month. Then we divide by the number of Active Listings in MLS.
This gives us the number of months of inventory for sale. Another way to look at it is that this also tells you the odds of selling in a given month. As an example, if there are six (6) months of inventory on the market, this means that the odds or probability of selling in any month is 50 percent (1/2). The probability the seller won’t sell in a given month is 50.0 percent (1/2). If there is 24 months of inventory then your odds or probability of selling in a month then is 4.2 percent (1/24) and the probability that the seller won’t sell in a given month is 96.8 percent (23/24).
