The supply of inventory in the real estate industry is defined by the current months’ supply of homes available for sale. Here is a great guideline:
1-4 months’ supply creates a seller’s market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
5-6 months’ supply creates a balanced market where historically home values appreciate at a rate a little greater than inflation.
7-8 months’ supply creates a buyer’s market where the number of homes for sale exceeds the demand. Depreciation follows.