HomeBlog HomeBlog PostsBased on Months of Remaining Inventory Rates, the Seller’s Market is Here to Stay for a While

Based on Months of Remaining Inventory Rates, the Seller’s Market is Here to Stay for a While

Based on Months of Remaining Inventory Rates, the Seller’s Market is Here to Stay for a While

Previously, we have discussed the very low inventory of homes for sale nationwide, and the impact that this has had on home prices. For context, we wanted to take a look at the months of remaining inventory (MRI) rate nationwide as well as in a few major metro areas, which provides a clearer picture of this phenomenon and is an excellent housing market indicator.

MRI measures the ratio of the current number of listings, relative to the monthly sales rate. In a nutshell, the MRI is the number of months it would take for the market to completely absorb all current listings, given the current rate of sales continues at the same pace, and no new homes are listed.

By measuring the MRI of a given market, we also get a standardized supply and demand indicator.

As seen in the below chart, the median overall price of a single-family home (SFH) and the MRI value are strongly inversely correlated, with the MRI leading price changes by about six months.

Markets with MRI values around five months are considered to be more balanced and in a “normal” condition. When we see MRI values of three months or less, we know that that market is considered stronger for sellers. The current national MRI rate is 2.5.

In this second chart, we see the annual change in SFH home prices for several major U.S. counties.

It is worth noting that virtually all counties evaluated, which cover a broad geographic cross-section of the country, have very low MRIs. This is one of the myriad reasons that home prices will continue to experience upward pressure for the foreseeable future.

Using its Daily Home Price Flash, Black Knight’s Collateral Analytics analyzes home sales and pricing information for major U.S. markets on a bimonthly basis, and publishes its findings on this blog.