The first two rules in real estate

Rule #1: All real estate is local.

Let's use data from our own Dane County real estate market to look at how the market can vary from one location to the next.

Months of inventory is a great measure that uses supply (# of listings) and demand (# of listings recently sold) to approximate the number of months needed to absorb the current listings on the market. As you'll see below the months of single family home inventory within Dane County varies significantly by location. Note: this data excludes condos (you'll find more info on condos later in this post).

The average months of inventory for all of Dane County is 8.7 months, with the Madison West, Madison East, Verona and Cottage Grove locations all faring well relative to the county as a whole. On the other side of the spectrum six suburban communities - Sun Prairie, Fitchburg, Stoughton, McFarland, Oregon, Mount Horeb - all have at least 11 months of inventory.

The data is very telling when you take a closer look at the months of inventory for the city of Madison. As you'll see below, four different MLS locations on the west side of Madison all have fewer than 6 months of inventory. All of these locations consist of older neighborhoods that offer relatively easy access to the University and Madison's downtown.

On Madison's east side, 3 different MLS locations have under 6 months of inventory. All of these locations consist of well-established neighborhoods located along or near the Atwood Avenue corridor.

Rule #2: The market varies by property type.

Take a look at the months of inventory for the Dane County condo market. The average for all of Dane County is 16.9 months, almost double the 8.7 months for the Dane County single family home market. The numbers for the the condo market include some big swings. Middleton and Cottage Grove have 12 or fewer months of inventory. Stoughton, Verona, Mount Horeb, Oregon and Monona all have at least 25 months of inventory.

On the west side of Madison, you'll also see some big swings in the months of inventory by MLS location. And you'll see some big swings by MLS location on Madison's east side.

The Dane County condo market has some very large inventory levels due a ton of new construction that has entered the market in the last three years. In some locations, where the historical demand for condos has been low, the data suggests it will be a matter of years (not months) before the market is able to digest all of the condos on the market.

On the flip side, there are locations within the Dane County single family home market where the months of inventory are actually quite low.

Related Reading:

• A recent article by the Wisconsin State Journal on the months of inventory by location
• Historical trending of active listings at DaneCountyMarket.com
• Months of inventory historical trending at DaneCountyMarket.com
• Monthly updates on how the months of inventory vary by location for homes and condos (DaneCountyMarket.com)