An appraiser observing that months of supply has fallen from nine to four should:

Correct Answer

A) Recognize a shift toward seller-favorable conditions

Why this is correct: Months of supply is a key market indicator. A drop from nine to four months means inventory is moving much faster, signaling increased demand relative to supply. This shifts bargaining power to sellers, typically leading to price increases or a positive time adjustment. The original explanation correctly notes this change in balance. Why the other choices are wrong: Concluding the market has weakened substantially is incorrect because falling inventory indicates strengthening, not weakening. Assuming no change ignores the significant shift in the supply metric. Applying a negative time adjustment contradicts the data, which suggests a positive adjustment is more likely. Exam tip: Remember, months of supply falling = seller's market; rising = buyer's market.