Realtors get that question quite a bit. The answer, which nobody likes, is “it depends.” Are you a buyer or seller or both? What kind of home are you trying to buy or sell? Where is it? What price range? All of those things can change the answer you get, since there isn’t just one answer to the question.
When I’m asked the question, there are a number of pieces of data that I rely on to start my answer, while also including my own anecdotal observations. The biggest one I look at as a general barometer of whether the market favors buyers or sellers is a stat called months of inventory. This measure, which is also often referred to as market absorption, is used to tell us how long it would take to sell every actively listed home on the market if no other homes were listed during that time. In other words, how long to exhaust the current supply given the current rate of sales. It is typically calculated by taking the number of active homes on a given day and dividing it by the number of closed sales in the previous month.
In the Portland metro, the most recent measure for months of inventory was 3.6 for the month of June. So, that means if nothing else changes, it would take 3.6 months to exhaust the current supply. To put it in context, the lowest this monthly metric has gone in the past five years was .7 (which is just bonkers) and as high as 3.7. Last June, it was at 2.6 months. A low number means it’s more of a sellers’ market, and a high number makes it more of a buyers’ market. The old rule of thumb, which may not be entirely valid anymore but that’s another story, has been that 4-6 months of inventory is a balanced market.
So that’s the macro market, but we all know that real estate is hyper-local and that 3.6 metric may not apply to you depending on what you’re buying or selling. Homes over $1 million are at 5.8, while homes under $1 million are at 3.4. Right now in the 97229 zip code– which means much of the Bethany and surrounding area– monthly inventory is 5.8. Why? Plenty of theories there, between it being a higher price point, or being more exposed to layoffs at Intel and Nike, or it just being the luck of the draw based on sample size. If we’re talking about single level detached homes, which I went deep on a couple months ago, monthly inventory in the metro is at 2.0. Condos and townhomes go the other direction, at 6.3 months. Plenty of those to be had.
The bottom line is that a close look at the micro market conditions of whichever micro market you’re participating in is important to making good decisions. Sellers have to know what they’re selling and price for the competition they’re facing. Buyers need to know how much leverage they have in negotiating. While months of inventory isn’t a metric that is looked at in a vacuum, it can be a very important piece and a very simple one to use.
