Each Friday, Robbie Briggs, CEO of Briggs Freeman Sotheby’s International Realty, writes about luxury, trends, business and more in the advertising pages of the Mansion section of The Wall Street Journal. Below is his letter of September 10, 2021.
FROM MY PERSPECTIVE
There is a word in the real estate business that has been in the news a lot: inventory — as in, “low inventory” or “a shortage of inventory.”
What exactly does inventory mean?
Inventory and its coordinating measurement — months’ worth — are indicators of the housing supply at any given moment. Months Of Inventory (MOI) is a calculation that quantifies the relationship between supply and demand in a housing market. To put it into a question: If homes stopped coming on the market today, how many months would it take to burn through all the homes currently available for sale? The MOI answers that.
This is what to know: In a normal, balanced market, there are about six months’ worth of homes for sale — a virtuous circle of enough homes to satisfy the demand for both buying and selling. (A tip: If the MOI drops below four, sellers gain asking power. If the MOI rises above six, buyers gain negotiation power.) In the Texas market now — where we are seeing fast sales, cash deals and multiple offers — the MOI has dropped to just 1.1. That means all the homes on the market right now would be gobbled up in a month, if no more new homes came up for sale.
That is one hot market. And, that low inventory is why you need an agent more than ever. The big question we’re getting, in this market where our sellers are doing very well, is: If I sell, where will I go? Our agents can answer that, thanks to their connections and knowledge, especially of opportunities that they could create for you.
That is what experienced pros can do — no matter what the numbers are doing.