Is Bakersfield a Buyer's or a Seller's Market Now?

As a Real Estate Agent in Bakersfield, California I am interested in spotting trends, both nationwide and locally. One good test of whether we are in a Buyer's or a Seller's market is called the Absorption Rate. That means looking at the inventory of homes, seeing how many sold in the past month, then dividing the total inventory by the amount sold. This gives you an idea of how many months it would take to sell off all the houses at the current pace of sales if no new homes went on the market. Though the numbers are constantly changing, and this model is a simplification of what is going on, it can nevertheless give you a really good idea of what is going on. The tipping point between a Buyer's or a Seller's Market is 6 months. If it would take longer than 6 months to sell off all the available houses, then the market is saturated, and that favors the Buyer. Sellers are the Supply, and Buyers are the Demand. If it would take less than 6 months, then the Sellers have an advantage, according to the Law of Supply and Demand.

In a Buyer's Market, if you find a motivated Seller, who really wants to Sell, or has to Sell, you can make low ball offers and have a good chance of being accepted. But once the tipping point of 6 months or less absorption rate is reached then you might find lots of Buyer's trying to get the same property, and the bidding becomes competitive and you might have to offer more to out bid the others. The lower the absorption rate, the more it favors the Seller.

Let's take a look at the numbers: Right now there are 3,301 homes for sale in Bakersfield in the MLS, and of those 3,301 there are 1,151 Traditional Homes, 1,208 REO, or Bank Owned, foreclosure properties, and 942 Short Sales. The Short Sales are homes that are offered for less than what is owed on the mortgage, and they require the lender's approval. REO's have already been foreclosed and the banks are trying to sell them to recover as much of the money as possible, but Short Sales require the lenders to let the Buyers off the hook and write off the loss.

So, of the 3,301 homes for sale right now in Bakersfield 35% are Traditional Sales, 37% are REO, and 28% are Short Sale offerings. From September 1st to October 1st, 2008 there where 604 Sales in Bakersfield, California. That translates to a 5.48 month absorption rate. Of the 604 sales in September, 161 were traditional sales, 378 where REO sales, and 65 were Short Sales. That means 27% Traditional Sales, 63% REO Sales, and only 10% Short Sales.

If we break up Bakersfield by zip code, then we get different numbers. For an example, I will use the 93312 zip code, which is the zip code for where my office is located in Northwest Bakersfield. There are 352 homes for sale in 93312, with 133 being Traditional Sales, 86 being REO, and 133 being homes offered as Short Sales. That's 38% Traditional, 24% REO, and 38% Short Sale.

104 homes were sold in 93312 zip code from September 1st to October 1st. That is a 3.38 month absorption rate. 93312 is even more of a Seller's Market than Bakersfield as a whole. Of the 104 homes that sold in September, 35 or 34% were Traditional Sales, 51 or 49% were REO's, and 18 or 17% were Short Sales.