We can couple the price information with the Months of Supply Inventory (MSI), which quantifies the relationship between supply and demand. More specifically, MSI refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower MSI tends to push prices up more rapidly, according to the National Association of Realtors. At a national level, the supply of homes relative to demand is the lowest it has ever been since the data were first tracked in 1963. Because of technological advances, virtual tours, and faster document processing, homes can be sold quickly, thereby reducing the supply of homes for sale at a much faster rate.
The current situation creates a feedback loop that drives prices higher. The most desirable benefit, especially when there are three to four offers on a property, is that the property will be sold for the highest possible price. That home then becomes a comparable property for other homes nearby, driving up prices in the neighborhood when they, in turn, go on the market.