Another indicator of the condition of the housing market is supply of inventory, measured in months. The indicator is based on the number of homes selling at the present time, and the number of homes for sale at the present time. For example, if 10 homes were sold in July, and there are 100 homes for sale, there would be 10 months of inventory--it would take 10 months to sell the current inventory at the current rate of sale.

 

Six months of inventory is considered neutral. When there are more than 6 months of inventory, the market is considered to be a buyer's market. When there are less than 6 months of inventory, the market is considered to be a seller's market. In a buyer's market, prices tend to be decreasing. In a seller's market, prices tend to be increasing.

 

Notice in the graph below that we are close to 14 months of inventory in Whatcom County. Definitely a buyer's market with prices falling. Also notice the cyclical nature of inventory--inventory is lowest in the winter and highest in the summer. Also notice that we are trending up and have been since 2007.