The term "months of supply" in real estate tells us the time it would take for all the current inventory to sell, if it all sold, at the current rate without new inventory coming on the market.
How do we calculate the months of supply?
Months of supply is the number of houses currently for sale divided by the average number of homes sold per month. Let's have a look at the calculation.
In the past 12 months 3999 single family homes sold in Niagara. If we divide the total by 12 we get an average of 333 homes per month. (We are using an average of the last 12months accounts to account for seasonal variation.)
So to get the months of supply we divide the current supply which is 897 homes by the 12 month average sales. We currently have 2.69 months of supply.
6 months of supply is considered the benchmark for a balanced market. Less than 6 months of supply favours the sellers because there are less choices for the buyer.
More than 6 months favours the buyers and leads to lower prices.
