Like this.

The graphic is essential and allows the owner to 'see' the market their house must participate as well as an opportunity to explore what each market type means to the owner.

Green means more money.

Read means NOT more money.

It is basic economics. If there is more supply than demand, prices go down. If there is more demand than supply, prices go up. Our market is a seller's market with less than 3 months supply - and prices have been escalating roughly 10% per year for the last 5 years. During the recession, we had a buyer's market with much more inventory than demand and prices fell drastically.

Michel Brien - wow! Good answer from Annette Lawrence , Palm Harbor, FL 727-420-4041.

Annette Lawrence , Palm Harbor, FL 727-420-4041 nailed this one!

Usually, there are fewer months of inventory in a seller's market, and prices tend to be on the increase.  More months on the market, and it's the reverse. But this is only a sort of rule of thumb.

I like the detailed answer from Annette Lawrence , Palm Harbor, FL 727-420-4041 ! Very informative!

The law of supply and demand should explain this pretty well. 

Thanks Annette Lawrence , Palm Harbor, FL 727-420-4041 for reducing my migrane this mornng!

Supply and demand... more supply, less demand, prices go down. More demand, less supply, price go up. Run your numbers.

I do like Annette Lawrence , Palm Harbor, FL 727-420-4041 's graphic.

   Economics 101.  Supply and demand.

     Create a chart (like Annette Lawrence , Palm Harbor, FL 727-420-4041) using RPR, your local MLS data, or some other reliable source.

Great answer, Annette Lawrence , Palm Harbor, FL 727-420-4041!

I'm going to second Annette Lawrence , Palm Harbor, FL 727-420-4041 comments, she has a great answer.

Supply and demand is fairly simple to explain.  The more buyers have to choose from, the more aggressive sellers are going to be with their price to get those buyers.  A lot of inventory means a lack of buyers, so prices go down.  

Conversely, a lack of inventory means prices go up because there isn't as much for buyers to choose from.  

Supply and demand ecconomics here!

I believe you are referring to absorption rate.  It may or may not mean more appreciation or depreciation.

Annette gave you the answer....

Your real estate instructor should know this one.

It's the law of supply and demand.

This is commonly referred to as absorption rate if I understand your question, however supply and demand dictates price even over time

Others have answered.

In short when you have a shortage of homes for sale, and lots of buyers prices rise. When you have more homes than buyers, prices decline

need more time

Depreciation is an accounting and tax concept and is not applied to current assets such as inventory. 

Lynnea Miller Says it well.

Any basic economics class will point you in the right direction Michael.

You have some good answers. Much depends upon your local market conditions.