Ever wonder how long it might take to sell that piece of land once you buy it? Or whether you’re walking into a market flooded with inventory that could take years to clear? That’s exactly what Months of Inventory can tell you, and it’s one of the most intuitive metrics you can use to understand any land market.

Unlike other market analysis tools that give you ratios or percentages, Months of Inventory speaks in plain English:

“At the current sales pace, it would take X months to sell all the properties currently on the market.”

It’s like having a crystal ball that helps you peek into the future and see how long you might be holding onto a property before finding a buyer.

The Months of Inventory calculation is refreshingly straightforward. You take the number of properties currently for sale and divide it by the average number of properties that sell each month. Here’s the formula:

Months of Inventory = Current Active Listings ÷ Average Monthly Sales

To get your average monthly sales, you simply take the total number of properties sold in the past 12 months and divide by 12.

Let’s walk through a real example. Say you’re looking at a county where there are currently 180 vacant lots for sale. Over the past year, 240 lots have been sold, which means an average of 20 lots are sold per month (240 ÷ 12 = 20). Your MOI would be 180 ÷ 20 = 9 months.

This tells you that if sales continue at the current pace and no new listings are added, it would take 9 months to clear all the current inventory. Of course, new listings will be added, but this gives you a baseline understanding of how saturated the market is right now.

The beauty of Months of Inventory is that it translates market conditions into timeframes that make intuitive sense. When you hear “3 months of inventory,” you immediately understand that’s different from “18 months of inventory” without needing to interpret ratios or percentages.

Generally speaking, 6 months of inventory is considered a balanced market where supply and demand are relatively equal. This is often used as the benchmark for normal market conditions.

When you see MOI below 6 months, you’re looking at a seller’s market. The lower the number, the hotter the market. An MOI of 3 months or less typically indicates a very hot market where properties sell quickly and buyers may face competition. In these markets, you might have an easier time selling but could face challenges finding good deals to buy.

On the flip side, an MOI above 6 months suggests a buyer’s market. The higher the number, the more inventory is available relative to demand. An MOI of 12 months or more indicates a slow market where properties sit for extended periods. These markets often present more opportunities to find good deals but may require patience when it comes time to sell.

I’ve seen land markets with MOI as low as 2 months during hot periods and as high as 24 months or more in really slow areas. Both extremes present unique opportunities and challenges that smart investors can navigate with the right strategies.

While Months of Inventory might seem like just another number to track, it actually provides insights that other metrics can’t match. When you know a market has 15 months of inventory, you’re getting a clear signal about what you’re walking into as an investor.

This information directly impacts your investment strategy. In a market with 4 months of inventory, you might be more aggressive with your offers, knowing that properties move quickly. You might also be more willing to pay closer to market value since you can expect a faster sale.

Conversely, in a market with 18 months of inventory, you’d probably want to be much more conservative with your purchase prices. You’ll likely need to hold properties longer, so your profit margins need to account for extended holding periods and carrying costs.

MOI also helps you set realistic expectations with potential buyers and sellers. If you’re working in a market with 12 months of inventory, you can honestly tell sellers that properties in the area typically take close to a year to sell. This sets appropriate expectations and can help you negotiate better terms.

One of the most important things to understand about Months of Inventory is how seasonal patterns affect the numbers. Land sales in many markets follow predictable seasonal cycles, especially in northern climates where winter weather can significantly slow activity.

If you calculate MOI during the peak selling season using recent sales data, you might get an overly optimistic picture. Conversely, calculating during the slow season using slow-season sales data might make a market look worse than it actually is over a full year.

This is why using 12 months of sales data is crucial for MOI calculations. It smooths out these seasonal fluctuations and gives you a more accurate picture of normal market velocity. However, you should still be aware that your calculated MOI represents an average, and actual selling times will vary by season.

For example, if your analysis shows 8 months of inventory, properties listed in spring might sell in 4-5 months, while properties listed in late fall might take 10-12 months. Understanding these patterns helps you time your buying and selling activities for maximum efficiency.

You’ll often see Months of Inventory discussed alongside other metrics like the Sold-to-For-Sale Ratio, and it’s worth understanding how they complement each other. While the Sold-to-For-Sale Ratio gives you a quick snapshot of market velocity, MOI translates that velocity into practical timing estimates.

The Sold-to-For-Sale Ratio is great for quickly comparing multiple markets or ranking them by activity level. MOI is better when you need to make timing-based decisions or set realistic expectations for holding periods.

For instance, you might use the Sold-to-For-Sale Ratio to narrow down 20 potential markets to your top 5, then use MOI analysis to understand the timing dynamics in each of those final candidates. Both metrics are looking at the same underlying market conditions but presenting the information in different ways for different purposes.

MOI also tends to be more intuitive when communicating with partners, lenders, or other stakeholders who might not be familiar with real estate metrics. Everyone understands what “6 months to clear the market” means, but ratios can require more explanation.

Let’s walk through the complete process of calculating MOI for a target market. I’ll use the same platforms most investors rely on: Zillow and Redfin for data gathering.

Start by defining your search parameters just like you would for any market analysis. Choose your target county, set your acreage ranges, and specify any other criteria that match your investment strategy. The more specific you can be, the more relevant your MOI calculation will be to your actual business.

First, gather your current inventory data. Search for vacant land currently for sale in your target area with your specified filters. Let’s say you find 145 properties currently listed. This is your numerator.

Next, you need to determine average monthly sales. Search for sold properties in the same area with the same filters over the past 12 months. Suppose you find 180 properties that sold. Divide this by 12 to get your average monthly sales: 180 ÷ 12 = 15 properties per month.

Now you can calculate MOI: 145 current listings ÷ 15 average monthly sales = 9.7 months of inventory.

Cross-check your numbers using a second platform like Redfin. You won’t get identical results, but they should be reasonably close. If Redfin shows 138 current listings and 168 sales over 12 months, your MOI would be 138 ÷ (168 ÷ 12) = 138 ÷ 14 = 9.9 months. Close enough to validate your initial calculation.

Once you have your MOI number, the interpretation is relatively straightforward, but context matters enormously. A 10-month MOI in a historically slow rural market might actually represent improving conditions, while the same number in a typically hot suburban market could signal a significant slowdown.

This is where research into historical trends becomes valuable. Try to find MOI data or similar metrics for your target market from previous years. Many real estate websites and local associations publish this kind of historical data. Understanding whether your calculated MOI represents normal conditions, improvement, or deterioration helps you make better investment decisions.

You should also consider what’s driving the current MOI. Is inventory high because lots of new properties are coming to market, or because sales have slowed down? Are average sale prices rising or falling? These factors affect how you should interpret and respond to your MOI findings.

For example, if MOI is high because many landowners are cashing out in a strong market, that might present buying opportunities as competition increases among sellers. If MOI is high because economic uncertainty has slowed buyer activity, you might want to be more cautious about jumping into that market.

One of the biggest mistakes investors make with MOI analysis is treating it as a prediction rather than a snapshot. MOI tells you what would happen if current trends continue unchanged, but markets are dynamic. Economic changes, interest rate shifts, or local developments can quickly alter the fundamentals that drive your MOI calculation.

Another common error is comparing MOI across dramatically different market types without considering context. A 10-month MOI in a rural recreational land market might be perfectly normal, while the same number in a suburban development market could indicate serious problems.

Be careful about using MOI calculated from small data sets. If your target market only has 20 current listings and 30 sales over the past year, your MOI calculation might not be statistically meaningful. Consider expanding your geographic scope or combining similar market segments to get more reliable data.

Don’t forget that MOI calculations based on MLS data miss significant portions of the land market. Many land transactions happen outside the MLS through direct marketing, online platforms, and word-of-mouth networks. Your calculated MOI should be viewed as a baseline rather than a complete picture of market activity.

The most successful land investors incorporate MOI analysis into their regular market research routines rather than treating it as a one-time calculation. Set up a system for tracking MOI in your active markets quarterly or semi-annually to spot changes that might affect your strategies.

Create standardized spreadsheets or use market analysis tools that allow you to consistently track MOI alongside other important metrics. This historical tracking helps you understand normal fluctuations versus significant market shifts that require strategic adjustments.

Consider automating parts of your MOI analysis using tools or services that can regularly pull market data and calculate metrics for you. While manual analysis is important for understanding the details, automation helps you monitor more markets more frequently without overwhelming your schedule.

When you’re actually working in markets, MOI becomes most valuable as a reality-check tool. If your analysis shows 15 months of inventory, but you’re planning to flip properties in 6 months, you need to either adjust your strategy or find different markets.

MOI also helps with pricing decisions on both the buying and selling sides. In a market with 4 months of inventory, you might price properties more aggressively since demand is strong. In a market with 20 months of inventory, conservative pricing becomes much more important.

Use MOI information when talking with sellers about realistic timelines and pricing. Sellers often have unrealistic expectations about how quickly their property will sell, and MOI data gives you concrete information to support more realistic discussions.

Months of Inventory is one of the most practical and intuitive metrics available for land market analysis. It translates complex market dynamics into simple timeframes that help you make better investment decisions and set realistic expectations.

The key to success with MOI analysis is understanding that it’s a tool for understanding market conditions, not a crystal ball that predicts the future. Markets change, and your strategies need to adapt accordingly. Use MOI as part of a comprehensive market analysis approach that includes multiple data sources and regular updates.

Remember that successful land investing happens in all kinds of markets, regardless of MOI. The goal isn’t to find the perfect market with the perfect inventory levels, but to understand the market you’re working in well enough to adapt your strategies appropriately. Whether you’re dealing with 3 months or 18 months of inventory, there are proven strategies for success if you understand the market dynamics and adjust your approach accordingly.

Most importantly, combine your MOI analysis with real-world market testing. The numbers give you a foundation for understanding market conditions, but nothing replaces actual experience buying and selling in your target markets. Use MOI to guide your initial decisions, then refine your understanding based on what you learn through hands-on experience.