A market carries 300 active listings against 25 monthly sales. The months of supply, and the pricing pressure it implies, are:
Correct Answer
A) Twelve months — heavy buyer's market, downward pressure
Why this is correct: Months of supply is calculated as active listings divided by monthly sales: 300 / 25 = 12 months. This indicates a heavy buyer's market (typically over 6-7 months), suggesting downward pressure on prices as sellers compete for few buyers. Why the other choices are wrong: "Twelve months — balanced, with neutral pricing" is wrong because a balanced market usually has 5-7 months of supply. "Two and a half months — clear seller's market pressure" would result from a calculation like 300/120, not the given figures. "Eight months — mild appreciation likely" still indicates oversupply and is not associated with appreciation. Exam tip: Memorize the benchmark: <5-6 months = seller's market; 6-7 months = balanced; >7 months = buyer's market.
Why This Is the Correct Answer
Why this is correct: Months of supply is calculated as active listings divided by monthly sales: 300 / 25 = 12 months. This indicates a heavy buyer's market (typically over 6-7 months), suggesting downward pressure on prices as sellers compete for few buyers. Why the other choices are wrong: "Twelve months — balanced, with neutral pricing" is wrong because a balanced market usually has 5-7 months of supply. "Two and a half months — clear seller's market pressure" would result from a calculation like 300/120, not the given figures. "Eight months — mild appreciation likely" still indicates oversupply and is not associated with appreciation. Exam tip: Memorize the benchmark: <5-6 months = seller's market; 6-7 months = balanced; >7 months = buyer's market.
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