Months of Inventory Underrated Indicator

When buyers and sellers try to understand the housing market, most look at familiar metrics: home prices, days on market, or the number of sales. While those numbers matter, there’s one indicator that quietly reveals more about market strength than almost any other – months of inventory.

Despite its power, months of inventory (MOI) is often overlooked by consumers. Here’s why you may want to pay closer attention to this market indicator.

What Is Months of Inventory?
Months of inventory measures how long it would take for all current homes on the market to sell if no new homes were listed and sales continued at the current pace. The current MOI is calculated by dividing the number of active listings by the number of sales in the last month.

It’s essentially the speedometer of housing supply and demand:

• Low MOI = strong demand quickly absorbing new listings → Seller’s Market
• High MOI = homes are sitting longer and supply is outpacing demand → Buyer’s Market
• Balanced Market = the middle ground between a Seller’s Market and Buyer’s Market; typically around 3-5 months of inventory (though, this can vary by region)

This single metric captures the interplay between buyers, sellers, and available homes far better than price data alone.

Why Months of Inventory Matters So Much

1. It Reveals Market Pressure Before Prices Move

Home prices are often a lagging indicator and can change slowly over a period of several months. Further, you often want to see several months or more of price data to get a sense for pricing trends. This is good information, but it doesn’t give you a real-time look at how the market may be changing.

MOI, on the other hand, shifts quickly.

When inventory tightens or swells, MOI reacts almost immediately, giving you an early signal of:

• Upcoming price increases (when inventory is low)
• Possible price softening (when inventory rises)

If you want a preview of where the market may be headed, MOI is your early-warning system.

2. It Helps You Understand Competition Levels

For buyers:

• Low MOI means you’ll compete with more buyers for fewer homes. This often results in bidding wars, faster decisions, and limited negotiation leverage.
• High MOI indicates an abundance of inventory for buyers to choose from, which can mean more leverage for buyers.

For sellers:

• Low MOI suggests strong showing activity, quick offers, and potential for above-asking
  prices.
• High MOI tells you to price strategically, expect longer market times, and be flexible.

MOI gives both sides clear expectations so you can prepare accordingly.

3. It Balances Out Extreme Headlines

Housing market news tends to be sensational with dramatic headlines and news clips: “Prices skyrocket!”, “Sales plunge!”, “Demand cooling!”

But months of inventory often tells a more grounded story.

For example:

• Prices may be up year-over-year, but MOI could be rising – indicating the market is slowing beneath the surface.
• Sales volume might drop, but MOI could still be low – meaning demand remains strong relative to available inventory and prices are likely to hold.

MOI helps you see past dramatic headlines and understand what’s actually happening.

4. It Reflects What Buyers and Sellers Are Doing Right Now

Because MOI ultimately updates with every new listing and sale, it captures active behavior in the market.

It shows:

• Whether sellers are listing more homes
• Whether buyers are absorbing supply quickly
• Insight into how seasonal trends or interest-rate changes are affecting activity

It’s one of the few metrics that reacts in near real-time to market shifts.

5. It Helps Both Buyers and Sellers Determine Optimal Timing

If you’re a buyer:

• Target higher MOI periods (more selection, less competition)
• Watch for MOI trends in your specific neighborhood, desired property type, or price range

If you’re a seller:

• Ideally list when MOI is low to maximize exposure and price
• Use MOI to choose a competitive, data-backed list price

Timing the market perfectly is impossible, but tracking MOI makes timing smarter.

How Consumers Can Use Months of Inventory Today

Here’s a simple rule of thumb:

Keep in mind, these numbers can vary by region – I can provide more insight on this depending on the area you’re looking at. For example, some may consider 3-4 months of inventory still a mild seller’s market, or 4-5 months of inventory to be entering a buyer’s market.

The beauty of MOI is that it can be examined on the level that matters most: your local market – your city, your neighbourhood, specific property types, and even your price bracket.

Final Thoughts

Months of inventory is more than a statistic – it’s a window into the near real-time relationship between supply and demand. Whether you’re buying, selling, or investing, understanding this metric helps you

• anticipate price trends,
• gauge competition,
• make better timing decisions, and
• cut through market noise.

In a world full of complex housing data and dramatic headlines, MOI is simple, powerful, and often more revealing than anything else.

Get in Touch

As your trusted resource for all things real estate, I’d be more than happy to provide you with additional insight on how to best prepare for buying or selling real estate in any market. If you have questions about the market, please reach out anytime.

Want a better real estate experience? Let’s chat.