What Is Months Supply of Inventory?

When I put out my market statistics for communities around Chicago I pull a large number of stats to share with you.  One of my favorites is Months Supply of Inventory or MSI.  This is a simple way to help us talk about whether or not we are in a “buyers” or “sellers” market.  A quick look at how we figure it:

Let’s say Naperville, IL has 200 properties for sale in a certain month and 25 of them go under contract in that month.  We do some simple math:  200/25 and we get 8.  That months supply of inventory for that particular month would be 8.  At the current rate of properties going under contract it would take 8 months to get rid of the current inventory.   So, now what?  What does 8 mean to you and me?  I’ll tell you.

When we are looking at the numbers once we have figured them out we have to know a few simple things.  A “healthy” MSI is 4-6 months.  Anything higher than 6 months and it is an indicator that we are in a “Buyers Market.”  Anything under 4 months and we are looking at a “Sellers Market.”  When we start seeing MSI’s that go above 10 or 20 months and we can attache the work VERY STRONG to “Buyers Market.”

Let me know if you have any questions?  I’d love to help and feel free to browse the site…you’ll find tons of monthly statistics on several Chicagoland communities.  Just stopping to search for homes?  Check out my MLS Property Search and you’ll find a state of the art search that uses Google Maps.  Enjoy!!