A local study of one market segment finds that inventory has historically been balanced at about five months, give or take one month. Current inventory in that segment is five months. Based on the local study, which range of months describes a balanced market for this segment?
Correct Answer
B) 4-6 months
Under the stated locally supported benchmark, 5 months falls in the 4–6-month equilibrium range. The range comes from the local study, not a national rule. Interpret inventory with local history, property segment, pricing, marketing time and concessions.
Why This Is the Correct Answer
Option B is correct because current inventory of 5 months falls within the 4 to 6 month range. That range is the local study's benchmark for this segment, not a national rule.
Why the Other Options Are Wrong
Option A: 2-3 months
Option A, 2-3 months, is below the current figure of 5 months. Five months does not fall within a 2 to 3 month range.
Option C: 8-10 months
Option C, 8-10 months, is above the current figure of 5 months. Five months does not fall within an 8 to 10 month range.
Option D: 12-15 months
Option D, 12-15 months, is far above the current figure of 5 months. Five months does not fall within a 12 to 15 month range.
Local range, local answer
A balanced range comes from local data for a specific segment. Apply the range you are given, not a remembered national number.
How to use: Use this reminder whenever a question supplies its own benchmark.
Exam Tip
When a question supplies a benchmark, use it as given. Do not substitute a different rule of thumb.
Common Mistakes to Avoid
- -Applying a national rule of thumb instead of the local benchmark
- -Treating months of supply as meaningful without local context
- -Assuming one balanced range fits all property segments
Concept Deep Dive
Analysis
This question tests applying a local benchmark to an inventory figure. The study defines 4 to 6 months as balanced for this specific segment, and current inventory is 5 months. Five falls within the 4 to 6 month range.
Background Knowledge
Months' supply shows how long current inventory would last at the current sales rate if no new supply were added. What counts as balanced varies by market and property segment. Appraisers interpret inventory using local history, pricing, marketing time and concessions.
Real-World Application
An appraiser's local research shows that 4 to 6 months of inventory has historically meant stable prices for mid-priced homes in one county. Current inventory is 5 months. The appraiser describes the segment as in balance and supports that with recent sales.
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