Housing Inventory Explained

Housing Inventory Explained

Hi! I’m Christy Walton with RE/MAX Select in Portland Oregon and if you have been paying attention to the news, economists, or realtors like me, you know that there is a nationwide housing inventory shortage.

What that means is that there are too few real estate listings to match the number of buyers looking for a new home. In other words, we are seeing the basic economic theory of supply and demand in action. Adam Smith would be thrilled!

Right now, demand is more than supply. That means that all of those people who want to buy a home right now are making offers on a very few homes. They are bidding fast and hard for available homes. Supply is low. Demand is high and Prices go up. When the market evens out with more listings becoming available AND some buyers leave the market for one reason or another, prices will even out.

So, back to the definition of housing inventory. I talked about what it does, but what does it mean? Ready?

If we were to disallow new listings, with no more listings being taken, how long would it take for every single residential listing to go under contract? That means every HGTV and magazine perfect home, every condo, every residence, farmhouse, henhouse, outhouse, and doghouse… Uh, sorry. Carried away.

If every residence listed for sale were to go pending, how long would it take?

Right now, in the Portland Metro Area, inventory is at .07 months. For the record, that is 16 days. That is the new lowest record inventory in the 25 years of recorded RMLS history. So, in 16 days, barring new listings and the buyers’ momentum of last month, every listing would be sold. Wow.

For the math-minded driver folks, I will explain how we come up with that number.

1.       Find the total number of active listings on the market last month – 2,339.


2.       Find the total number of sold transactions for last month – 3,183.


3.       Divide the number of active listings by the number of sales. That determines the number of months of inventory remaining – here we get a partial month – .7 months

As a general rule, I consider 4-6 months to be a balanced market. Over 6 months, the market is firmly in the buyers’ favor. Under 4 months, it’s a sellers’ market. At 16 days, it’s very much a sellers’ paradise.

That’s all about inventory! I’m Christy Walton with RE/MAX SELECT in Portland Oregon. Feel free to contact me at www.goodnightchristy.com and check out the site for a free home evaluation, for weekly updates about the Portland housing market, and a lot more real estate information.