A market has 96 active listings absorbing at 12 units per month. Months of supply is:
Correct Answer
B) 8 months
Why this is correct: Months of supply = Active Listings ÷ Absorption Rate. Here, 96 active listings ÷ 12 units/month = 8 months of supply. This indicates a balanced or slightly buyer-favorable market. Why the other choices are wrong: '12 months' incorrectly uses the absorption rate as the answer. '96 months' incorrectly uses the number of listings as the answer. '1,152 months' results from multiplying 96 by 12, which is not the correct formula. Exam tip: Months of Supply tells you how long it would take to sell current inventory at the current sales pace.
Why This Is the Correct Answer
Why this is correct: Months of supply = Active Listings ÷ Absorption Rate. Here, 96 active listings ÷ 12 units/month = 8 months of supply. This indicates a balanced or slightly buyer-favorable market. Why the other choices are wrong: '12 months' incorrectly uses the absorption rate as the answer. '96 months' incorrectly uses the number of listings as the answer. '1,152 months' results from multiplying 96 by 12, which is not the correct formula. Exam tip: Months of Supply tells you how long it would take to sell current inventory at the current sales pace.
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