Shedding light on common real estate terms and definitions.
Folks have asked me over and over, “What’s the most difficult part of becoming a real estate agent?” My answer was immediate – imposter syndrome. From day 1 my team leaders plugged me in to committees, groups, and organizations full of seasoned veterans so darn good at talking the talk and walking the walk it completely overwhelmed me. My pre-licensing classes taught me plenty about stuff like ‘metes and bounds’, and ‘ingress and egress’ but it didn’t have a ton of info on what the day to day would be like (an entire day dedicated to how to open different locks would’ve been fantastic). I hoped that once I had a better command of the vocabulary I’d be a more competent and capable agent.
Well, I was 100% correct. This may shock you, but knowing all of the terms and slang is pretty darn helpful. Perhaps most importantly, it drastically reduced the number of times I was corrected by an HGTV aficionado (you know who you are). So, with this in mind, I’ve decided to do a somewhat regular blog post explaining – in the most basic way possible – what some of this stuff you hear all the time actually means. Without further ado:
…What the heck is inventory?
I imagine we all have a pretty good idea what inventory means at a base level. It’s a supply or stock of a certain commodity. This definition applies to real estate inventory also, but we’ll go a little deeper. “Inventory”, “Active Listings”, or “Home for Sale” all refer to the same thing – a raw count of actively marketed properties. When a seller lists a property it’s now considered to be part of inventory.
Think of it like a bathtub. The water coming out of the faucet is the ‘new listings’. The water going down the drain is the ‘closed properties’ or those with accepted contracts. They’re no longer being actively marketed. The water level in the tub is our inventory.
If you’re a buyer you want this water level to be high, overflowing even! The more inventory available the more options the buyer has and thus the more power they have to negotiate terms with the seller. This is what people are referring to when they say it’s a “buyer’s market”.
If you’re a seller, let that tub run dry baby! It’s just the opposite as above. Less homes available equals more buyers competing with each other which equals favorable terms for the seller. This, you may have guessed, is a “seller’s market”. I don’t know if you’ve been paying attention recently but – at the time of publishing – this is where we are now. Oh man, is this where we are now.
A healthy, balanced market means there is 5-7 months of inventory. Meaning, if starting today zero new homes became available, there would still be enough houses for buyers to purchase for 5-7 months.
I hope this helped! If you’d like to learn more about where your local market and inventory levels are today please give me a holler. I’ll be back soon with some more info, insights, and random opinions that absolutely no one asked for 🙂