Inventory is the array of finished goods or goods used in production held by a company. Inventory is classified as a current asset on a company's balance sheet, and it serves as a buffer between manufacturing and order fulfillment.

Failing to accept that some buyers will not wait for a home to be built from scratch is equivalent to conceding a finite portion of the market to those competitors willing to maintain inventory. So, having partially or fully completed homes needs to be considered by all builders.

The obvious reasons to build inventory are increased sales and deliveries with minimal additional overhead expense. But there are numerous other important reasons to construct inventory in support of company production, sales, and marketing strategies. Whether you’re jump-starting a new subdivision or maintaining even-flow production, the role of inventory goes far beyond increased volume.

For every builder, there’s an optimal mix of presold and inventory homes based upon market factors, risk tolerance, available capital, and credit. Once this mix, or inventory target, has been established, the most important factor in managing that inventory is how many times per year you can sell and replace any given home.