What "months of supply" actually tells you

If you read my monthly briefings you’ll see this number come up constantly. It’s worth understanding, because it says more about what a market feels like than the median price does.

The plain version

Months of supply answers one question: if no new homes came on the market, how long would it take to sell everything currently for sale at the current pace?

That’s it. A low number means homes are getting absorbed faster than they’re being listed. A high number means inventory is piling up.

The rough scale

The industry convention puts “balanced” somewhere around five to six months. Treat that as a guidepost rather than a rule, and treat it as a market-wide average rather than a fact about your house. Supply can be tight in one price range and loose in another in the same county, and a condo and a four-bedroom on an acre are not competing for the same buyer.

What it means for you

Low supply, buying. You’re competing. Expect homes to move fast, expect to bid against other people, and be ready the day the right one lists. Connecticut has been running tight, which is why well-priced homes there pull real competition.

Low supply, selling. You have leverage, but it isn’t unlimited. Competition happens on well-kept, well-priced homes. An overpriced house sits in any market.

Rising supply, buying. You have room to be picky. You can wait for the next one, and you should. That’s the shift happening in Madison County.

Rising supply, selling. You can’t price off last year’s comps and hope. Buyers have alternatives and they’ll take them.

Why I look at it before price

Median sale price tells you what already happened. Months of supply tells you where negotiating power is heading. It moves first.

It’s also why the two markets I work in can feel completely different in the same month, which is the reason I write a separate briefing for each one instead of a single national take.

Read the latest briefings for where each market stands right now.