RI Real Estate Inventory: The Best Market Indicator
As a Realtor I am often asked questions about the state of the current residential real estate market in Rhode Island and Southeastern Massachusetts. These questions come from both buyers and sellers alike. There is not a simple answer for this question because no one has a crystal ball to see what the future will bring so it is best to form an opinion based on data generated from actual sales activity.
No one has a crystal ball to see what the future will bring to the real estate market so it is best to form an opinion based on data generated from actual sales activity.
Buyer’s Market or Seller’s Market?
Since buyers and sellers (both local and nationally) behave differently based upon whether we are in a seller’s or buyer’s market, knowing where we are on that spectrum can be invaluable. If you are a buyer, you know that in a seller’s market, demand will exceed supply so homes will sell quickly and there will be increased competition for each property. Conversely, in a buyer’s market there is plenty of inventory, so sellers need to do whatever necessary to attract a buyer to purchase their property.
Be Aware of Inventory Levels
Being aware of inventory levels is key to knowing where the market sits and the best indicator of that is to use a measure commonly referred to as “months’ of supply” to guide a response about the market. In our office at Homes By Connect we have been discussing this metric for a few years now and almost every time it comes up the low number generated by our local market has been jaw dropping recently to say the least.
Meredith Dunn, Research Communications Manager for the National Association of REALTORS® explained the concept of “months’ of supply” in a January 2021 NAR Economic Projection publication:
“NAR’s reported inventory indicates the number of properties marked as “active” on the market, as well as pending sales. When a seller lists a property, it becomes counted as inventory. When it goes under contract, it becomes a pending sale. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If inventory is rising, there is less pressure for home prices to increase. Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.” Six months of supply indicates what we would consider a balanced market.
Why You May Benefit When Inventory Levels are Low
You can easily see that in Rhode Island our inventory levels are at a critical level and still far below the national average. This means that in the State of Rhode Island if you are considering the sale of your home, do not hesitate as there will be many buyers to choose from. If you are planning to buy, it will be important to educate yourself and be surrounded by professionals who can help you navigate through what may be intense competition. Most importantly, do not give up if home ownership is your dream.
If you are considering the sale of your home, do not hesitate as there will be many buyers to choose from. If you are planning to buy, it is important to educate yourself and surround yourself with professionals who can help you navigate what may be intense competition.
If you have questions about the real estate market, ask a licensed Realtor®. At Homes By Connect, our trusted real estate agents are experiencing this market in real time and we can give you a real time understanding of inventory levels and market conditions in our area.
Elise Olson is a Broker Associate with The Donovan Group at Homes By Connect in Portsmouth, Rhode Island.