Months of Inventory is a statistic used to describe the current housing inventory.  It is a simple, but effective way to judge the market activity/scarcity.  Months of  inventory is the number of months it would take to sell all of the current listings at the rate of sales for a given month.

Example:

In December of 2008 Humboldt County had 1,441 listings and 79 sales.  This represented 18.24 months of inventory.  This means that there is a large selection of homes for buyers to choose from, it also means that the sales prices are likely to fall.  More inventory + fewer sales = downward pressure on prices. 

A lower Months of inventory figure (1-7 months) indicates that there is not enough inventory for buyers and prices are likely rising.

For more information feel free to call me, Andy Parker (707) 616-3456 or email at andy@azalearealty.com