How Competitive is the Current Market?

There are many factors that will determine how fast and at what price a home will sell:  age, condition, location and price. A significant yet often overlooked factor in a buyer's market is also the inventory of homes, and the rate of absorption in the market.

Inventory is important because it determines the competition in the market place, which goes back to basic economic principles of  "Supply and Demand". With the current market situation, supply is definitely up, and the demand, created by both the mortgage industry's state of transition, wherein programs are modified or dropped daily, and down payment amounts are creeping upward, make a qualified and ready buyer a rare item. 

When the inventory is up, then sellers must be realistic about their selling price, because the neighbor down the street may have a more realistic and objective view of their property and be willing to take a modest gain on the home in order to get it sold and get on with their lives. With 20-30 3-bedroom homes in the market, especially in the smaller towns, pricing is key. 

Likewise, for the savvy buyer, recognizing that the market is to their advantage not only allows them to focus on that house with more bonus features, but also allows them some greater flexibility with an offer, provided it's not an insult to the sellers or their agent, and an embarrassment to their agent to present. It's not all that unrealistic to see a buyer present an offer 10-15% below current asking. This is offered with the understanding that their agent did a real market analysis for the buyer, and possibly did some further investigating in town records to make sure that the property is not burdened with mortgage debt, which makes the "low ball" number impractical. Buyers are looking at different price ranges in neighboring towns so as to possible take advantage of that rare opportunity to get that special house from a highly motivated seller.

Inventory levels are typically expressed in months. The number of homes listed for sale are divided by the number of homes that have sold in a previous given period. This would provide an indication of the market's ability to move the current inventory, or more commonly known as the market's absorption rate. In a normal market, a three months inventory would be a seller's market; three to six months of inventory is considered a neutral market, and more than six months is a classic buyers market.

Paying attention to the inventory is necessary in order to properly price a property for a given market. Looking at sales in a given neighborhood or town is important. But equally important are the number of active listings on the market, which is considered inventory.

The chart below is an indication of the current inventory of single family homes in 10 towns in the Greater Waterbury Area. The level of inventory points to a strong buyer's market. As always, the use of a Realtor to properly assess and analyze the market is the safest way to make the home purchase a success.