Episode 153 – Real Estate Inventory and Days on Market

Episode Description

Real estate inventory and days on market are two useful indicators for understanding local market conditions.

In Episode 153 of Building Passive Income, CREI Collin explains how investors can use inventory, days on market, and months of supply to evaluate supply, demand, pricing pressure, and negotiating leverage.

However, these numbers should never be used in isolation.

The key is to compare current data with historical trends and then combine it with price reductions, pending sales, transaction volume, financing conditions, employment, and migration.

What You’ll Learn About Real Estate Inventory

In this episode, you’ll learn:

• What real estate inventory measures
• The difference between active inventory and new listings
• How to understand days on market, or DOM
• How months of supply is calculated
• Why there are no universal inventory or DOM thresholds
• How inventory and DOM can provide context about negotiating leverage
• Why price reductions and pending sales matter
• How seasonality can affect market data
• Where to find reliable housing-market information
• Why investors should use multiple indicators together

Key Takeaways

1. Real Estate Inventory Helps Measure Supply

Real estate inventory generally refers to properties currently available for sale.

However, investors should distinguish between active inventory and new listings.

Active inventory can rise because more sellers are listing properties. It can also rise because existing listings are taking longer to sell.

In fact, inventory can increase even while new listings decline if sales slow enough that existing properties remain on the market longer.

Therefore, understanding why inventory is changing can be more useful than looking at the number alone.

2. Days on Market Helps Measure Market Pace

Days on market, or DOM, generally measures how long a property remains listed before going under contract or selling.

However, methodology can vary by data provider.

That means investors should use consistent sources when comparing DOM over time.

Longer DOM can indicate slower market conditions. Meanwhile, shorter DOM may indicate properties are moving more quickly.

Still, DOM reflects the interaction of supply, demand, pricing, and property characteristics.

It should not be treated as a pure measure of demand.

3. Months of Supply Adds Important Context

Months of supply estimates how long the current inventory could last at the existing sales pace if no additional properties were listed.

A lower number can indicate tighter supply relative to sales activity.

A higher number can indicate more available supply relative to demand.

However, there is no universal number that automatically defines a buyer’s market, seller’s market, or balanced market.

Instead, compare current real estate inventory and months of supply with the market’s historical range.

4. Inventory and DOM Work Better Together

Inventory and days on market become more useful when analyzed together.

For example, rising inventory combined with rising DOM may suggest the market is becoming less competitive.

Meanwhile, falling inventory combined with shorter DOM may suggest available properties are moving more quickly.

However, low inventory and low DOM do not automatically mean the entire market is highly liquid.

Transaction volume matters too.

Therefore, look for confirmation across multiple indicators before drawing conclusions.

5. Watch Price Reductions and Pending Sales

Price reductions can provide additional information about seller expectations.

If reductions become more common, sellers may be adjusting to changing market conditions.

Pending sales can also provide a timely signal because they show properties that recently moved under contract before those transactions appear in closed-sales data.

Another useful measure is the sale-to-list price ratio.

However, methodology varies. Some providers compare the sale price with the original list price, while others use the final list price.

Always understand how the data source calculates the metric.

6. Account for Seasonality

Many housing markets experience seasonal patterns.

Listings and sales activity may increase during certain parts of the year and slow during others.

However, seasonality varies by geography.

Therefore, comparing September with August may not tell the whole story.

Compare current real estate inventory and DOM with the same period in prior years when possible.

That provides better historical context.

How Investors Can Use Real Estate Inventory

Investors can use inventory and DOM to develop a better picture of current market conditions.

However, neither indicator should determine an investment decision by itself.

Consider these metrics alongside:

Price reductions

Pending sales

Transaction volume

Sale-to-list ratios

Mortgage rates

New construction

Employment trends

Population and migration

Rent and vacancy trends

For example, rising inventory might initially appear negative.

However, the reason matters.

Perhaps new listings increased.

Perhaps mortgage rates weakened demand.

Or maybe properties simply started taking longer to sell.

Likewise, strong employment and migration can support housing demand, but new construction can increase supply at the same time.

The complete picture matters more than any individual number.

Common Real Estate Inventory Mistakes

One common mistake is using rigid thresholds.

There is no universal DOM or months-of-supply number that perfectly defines every market.

Another mistake is looking at one month of data.

Short-term changes can reflect seasonality or temporary volatility.

Investors can also make mistakes by comparing data from different providers without checking methodology.

Finally, don’t assume that rising inventory automatically means prices will fall.

Real estate inventory provides information about market conditions. It does not predict the future by itself.

Bringing It All Together

Real estate inventory and days on market can help investors understand the balance between available supply and current market activity.

However, neither metric should be used alone.

Track inventory.

Track days on market.

Watch months of supply.

Then add price reductions, pending sales, transaction volume, financing conditions, employment, migration, and new construction.

Most importantly, compare current data with the market’s own historical patterns.

When you combine multiple indicators, you build a more complete picture of current market conditions—and better context for underwriting and investment decisions.

Resources Mentioned

Local MLS — Detailed local listing, inventory, and sales data

Realtor.com — Housing inventory and market data

Zillow — Housing inventory and for-sale market trends

FRED — Housing and economic data

U.S. Census Bureau — Housing construction and supply data

CoStar — Commercial real estate and multifamily market data

Why Now? Reading the Market

Episode 153 continues our Why Now? Reading the Market theme.

Episode 151: Where Are We in the Real Estate Cycle Right Now?

Episode 152: Reading Interest Rate Signals — What the Fed Is Telling Us

Episode 153: Inventory Levels and Days on Market — What They Tell You

Episode 154: Rent Growth vs. Price Growth — Which One Matters More?

Episode 155: Employment Data and Migration Trends — The Fundamentals That Drive Demand

Each indicator adds another piece to the market picture. No single metric tells investors whether they should buy, sell, or hold.

Next Episode

In Episode 154, we’re comparing rent growth and price growth.

We’ll look at what each indicator tells investors, why rents and property prices can move differently, and why NOI matters more than rent growth alone for income-producing real estate.

Let’s Talk

Understanding real estate inventory provides useful market context. However, the individual investment still needs to work.

If you’re an accredited investor interested in passive real estate investment opportunities, connect with CREI Partners to learn more about our investment approach and current opportunities.

Schedule a strategy call with CREI Partners.

Subscribe & Review

Subscribe to Building Passive Income for more conversations about real estate investing, market fundamentals, and passive income.

If this episode was helpful, consider leaving a review and sharing it with another investor.

Disclaimer

This podcast is for educational and informational purposes only and does not constitute investment, legal, tax, accounting, or financial advice.

Real estate investments involve risk, including the possible loss of principal. Market conditions, property performance, financing terms, and investment outcomes can change.

Examples and market indicators discussed in this episode are illustrative and should not be interpreted as predictions or guarantees.

Prospective investors should conduct their own due diligence and consult appropriate professional advisers before making investment decisions.

SEO Keywords

real estate inventory, days on market, DOM, months of supply, housing inventory, housing market analysis, real estate market data, market liquidity, price reductions, pending sales, sale-to-list ratio, housing supply, market indicators, real estate investing, multifamily investing, passive real estate investing, CREI Partners, Building Passive Income