What does Market Inventory mean?

If you are looking for a house to buy or are thinking about selling, ask your Realtor about the Market Inventory.  You will likely catch them off guard if they are not on top of things in the market, but a good agent will be able to tell you how many months of inventory are on the market at the moment.  I currently have the market inventory broken down by county and either up to $300,000 or over $300,000.  I'll be talking about a lot of numbers, but these are numbers your agent should be paying attention to.

As of today, there are 1,263 homes available with at least three bedrooms in Milwaukee County for up to $300,000.  Within the past 30 days, 544 homes sold.  The market inventory is calculated by the current number of homes available divided by the number of homes sold the previous month within the same parameters.  That means there is 2.3 months of inventory right now for that category. 

The market is generally a seller's market when the inventory is less than three months, neutral around 3-6 months, and a buyer's market if it is more than 6 months.  We usually see some shifts as the seasons change in Milwaukee county, with summer being more active and winter being slower.  The inventory can also change from price cutoff changes and from county to county.  For example, the current market inventory for three bedroom homes in Milwaukee county at $300,000 or more is 3.5 months.  The current market inventory for a three bedroom home in Waukesha county (one county to the West) up to $300,000 is 2.1 months, and for at least $300,000 is 4.6 months.  An agent will know if it is a market where selling prices will probably go for over list price, around list price, or for less than list price based on the inventory as well.  The misconception is that it is currently a seller's market in the area.  For homes under $300,000 in the counties I mentioned, this is still a true statement, although you can see the shift is coming.  For homes above $300,000, it is in the neutral market zone, but is creeping closer to a buyer's market.  I would advise my buyers and sellers differently based on the price point of the house.

However, it is also important to take into consideration that the number of new homes on the market within the past 30 days that are still active on the market is 570 homes for the under $300,000 range for Milwaukee County.  So more homes last month were added to the MLS than were sold in that price range.  In Waukesha county, although 221 homes sold in the above $300,000 range, 405 homes were added that are still active.  If the number of sales do not increase proportionately this month, then the inventory numbers will only get higher, and the inventory was already at 4.6 months in Waukesha county for that price range.

The shift from being a seller's market to a buyer's market is coming.  It has already started to hit in other parts of the country, so if you are thinking about listing, you will want to strongly consider to not wait since you may not get what you want for your home one year from now if you are in the $300,000+ range.  Even the up to $300,000 range is starting to steady out to where you may not get a full list price offer and your home may sit for a few weeks to a few months on the market if you are holding out for a higher price.