In a market with a demand for 500 houses per year and 1,500 houses for sale, this most likely indicates a supply of what?

In a market with a demand for 500 houses per year and 1,500 houses for sale, this most likely indicates a supply of what?

• A. Two-year supply
• B. Three-year supply
• C. One-year supply
• D. Five-year supply

Answer: (B)

In a housing market, supply is measured by how many years’ worth of sales the current inventory could cover at the present pace of demand. Here, there are 1,500 houses for sale and buyers are purchasing 500 per year. Dividing gives 1,500 ÷ 500 = 3 years of supply. So, a three-year supply means the current listings would take about three years to sell at the current demand level. This indicates relatively high inventory compared to demand, which tends to favor buyers and can put downward pressure on prices. For reference, a one-year supply would require about 500 listings, a two-year supply about 1,000, and a five-year supply about 2,500, so the actual numbers point to three years.

In a housing market, supply is measured by how many years’ worth of sales the current inventory could cover at the present pace of demand. Here, there are 1,500 houses for sale and buyers are purchasing 500 per year. Dividing gives 1,500 ÷ 500 = 3 years of supply.

So, a three-year supply means the current listings would take about three years to sell at the current demand level. This indicates relatively high inventory compared to demand, which tends to favor buyers and can put downward pressure on prices. For reference, a one-year supply would require about 500 listings, a two-year supply about 1,000, and a five-year supply about 2,500, so the actual numbers point to three years.