The number of months of inventory (MOI) is a metric that indicates the supply and demand equilibrium in the housing market. The ratio represents the number of months (or days) it would take to completely sell the homes that are currently listed for sale, based on the area’s current rate of sales activity.
For example, if there are 1000 listings currently on the market, and 200 properties are being sold each month, then if no new listings appeared, the inventory would be sold within 5 months.
Typically, a balanced market has about 5 or 6 months of inventory on the market. This indicates that the supply and demand for properties is fairly equal.
In a buyer's market, there are more than 6 months of inventory. This means that there are many properties on the market which gives the buyers plently of selection and homes are likely to sell lower than their listing price. This is what we saw back in 2009-2013.
In a seller's market, there are less than 6 months of inventory on the market. The fewer months of inventory, the more competitive the market. This means that there are more buyers than there are available properties for sale, so buyers are competing to purchase homes. This can lead to multiple offer situations and properties selling above asking price. In a seller's market, it can require a bit more work and creativity to make a good deal, but some resourcefulness goes a long way!
In September 2018, Windsor is in a strong seller's market. At the end of September there were 1,532 listings on the market, and 532 listings sold in the month. This means that there are 2.8 months of inventory on the market, which indicates a seller's market.
As the number of days on the market decreases, the price increases due to increase demand. Below is a chart showing the correlation between the number of months of inventory in Windsor since 2013 and the average sale price in the same timeframe: