As we head toward the Spring housing market, it’s helpful to understand what kind of market we’re experiencing in Northern Virginia. Is it trending towards a seller’s market? Is it a buyer’s market? Are we in a well balanced market? The answer for Northern Virginia is “yes” - it just depends on which price range we’re considering. Don’t worry…we’ll explain.
A common way to gauge the overall health and activity of the current market is to determine the home absorption rate. The absorption rate measures how quickly all the current inventory of unsold homes would take to clear off the market if no additional homes were introduced. It’s based on how quickly homes have been selling, and how large the inventory is of unsold homes. The shorter the absorption rate, the faster the home inventory is being cleared off the market, which would tend to favor home sellers. Alternatively, a longer absorption rate signifies that homes are lingering on the market and conditions favor home buyers. In general, an absorption rate of less than 5 months is considered a “seller’s market”, and more than 7 months is considered a “buyer’s market”. A rate of 5-7 months is considered a “balanced market”, where sales conditions overall don’t tend to favor one side of the transaction (seller or buyer).
So how does all this apply to our Northern Virginia housing market? Here are the most recent absorption rates within various price ranges. These statistics are calculated for Fairfax County real estate, but the trend holds true throughout the area:
Home Price Absorption Rate Market Type
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Up to $250K 4.8 months Seller’s market (slightly)
$250K - $500K 5.0 months Balanced, but trending toward sellers
$500K - $750K 7.0 months Balanced, trending toward further balance
$750K - $1M 11.3 months Buyer’s market
$1M+ 14.3 months Buyer’s market
As you can see, different price ranges are experiencing completely different kinds of markets even within the same area. The composite absorption rate for Fairfax County, which again is analogous to the Northern Virginia region, is at exactly 6.0 months – about as “balanced” as you can expect. In reality, though, if you’re selling in the lower price ranges, you may see quite a bit more buyer competition and multiple offer situations than at the higher price ranges. Whether you’re buying or selling, these differences are so important to understand so you can take appropriate steps for the type of market in which you’re dealing. As always, the Equity Rise Team will be happy to analyze and advise on the type of market that YOU’RE dealing with for YOUR specific situation.
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