A subdivision segment has 150 homes for sale and sells 25 homes per month. Builders are adding 10 newly listed homes each month, and both paces are expected to hold. Counting those additions, how many months would it take until no homes remain for sale?
Correct Answer
B) 10.0 months
With 25 sales and 10 new listings each month, inventory falls by a net 15 homes per month, so 150 / 15 = 10.0 months. The 6.0 figure is the standard months'-supply statistic, which assumes no additional homes are added; 10.8 adds a full year of additions before dividing by sales; and 15.0 divides inventory by the additions rate.
Why This Is the Correct Answer
Option B is correct because each month 25 homes sell and 10 are added, a net reduction of 15. At that net pace, 150 homes for sale take 150 / 15 = 10.0 months to run out.
Why the Other Options Are Wrong
Option A: 6.0 months
Option A, 6.0 months, is 150 / 25, the standard months' supply. That measure assumes no additional homes are added, but here 10 arrive each month, so the net pace is 15 and the answer is 10.0 months.
Option C: 10.8 months
Option C, 10.8 months, adds 12 months of additions (120 homes) to the 150 and divides 270 by 25. Additions only matter until inventory runs out, which happens before a full year; netting the paces gives 150 / 15 = 10.0 months.
Option D: 15.0 months
Option D, 15.0 months, divides 150 by the 10 new listings per month. Additions increase inventory rather than reduce it; the inventory falls at 25 - 10 = 15 per month, giving 10.0 months.
Drain minus faucet
Sales drain the tub and new listings refill it; the tub empties at the drain rate minus the faucet rate.
How to use: Use this when a supply question includes a steady flow of new listings or completions.
Exam Tip
Check whether the question wants the standard months'-supply statistic or a sell-out time that counts ongoing additions. The wording about additions decides which.
Common Mistakes to Avoid
- -Using the standard months' supply when ongoing additions are specified
- -Dividing inventory by the additions rate
- -Adding a fixed year of additions regardless of when inventory runs out
Concept Deep Dive
Analysis
The ordinary months'-supply statistic answers how long inventory lasts if nothing new is added. This question removes that assumption, so the inventory shrinks only by the net of sales minus new additions each month. Recognizing the net depletion rate is the key step.
Background Knowledge
Months of supply relates the for-sale inventory to the current sales pace and, as Census defines it, assumes no new houses are built. In an active development area, continuing additions slow the drawdown of inventory, so the time to clear it depends on the net of sales and additions.
Real-World Application
An appraiser analyzing a master-planned community sees builders releasing new homes every month. To judge how long the competitive inventory will persist, the appraiser nets the release rate against sales rather than relying on the simple months-of-supply figure.
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