Market Heat Index
There are horror stories in the DFW housing market right now. Putting your offer in only to find out that you’re competing with 13 other bids and it goes for $10,000 above asking price. You’re not alone. Hundreds of families across the Metroplex are shaking their heads and saying “the market is just so hot right now.”
On the other side, sellers are elated. An all-cash offer above list price complete with a sizable earnest money check and a 5-day option period. Oh! And they want to close in two weeks?! Sign me up! “The market is just so hot right now!” Everyone is going around saying it. But how hot is the market, actually? In fact, how do you even determine the temperature of a market? How does it stack up against other major cities? How can I figure out if it is even cost-effective for me to buy at this point?
Real estate professionals use the term “months of supply” to show how much inventory of homes are for sale in a given market. The months of supply is the time it would take for all the current inventory to sell if it all sold at the current rate without new inventory coming on the market.
HOW DO WE CALCULATE THIS?
Months of supply is the number of houses currently for sale divided by the average number of homes sold per month.
HERE’S DFW.
In the past 12 months 82,007 homes have sold in the DFW area (specifically Dallas, Tarrant, Denton, and Collin County). If we divide 82,007 by 12 we get an average of 6,834 homes per month.
So to get the months of supply we divide the current supply which is currently 14,626 by 6,834.
DFW currently has 2.1 months of supply of real estate.
WHY IS THIS NUMBER IMPORTANT?
It means that DFW is hot. Market balance is considered to be 6 months of supply with more than that favoring buyers and less favoring sellers. This low supply is what is making home values across the Metroplex skyrocket. While eventually DFW will swing back towards market equilibrium, I fully expect the inventory to remain low for the next couple of years, thus keeping that market hot.