In 2005, Lisa was trying to buy a condo. I was lucky enough to be her REALTOR. Lisa is a hard working, caring, compassionate young mother of 2 very well behaved girls. As I look back now, I would have to say that Lisa was one of my most motivated clients. Offer after offer was turned down. We competed with an average of 10 other offers and with buyers who were willing to go over the asking price and appraisal by $20,000. Unfortunately we could not. One property had 18 offers in the first day.
It eventually took 19 offers, 2 contracts, thousands of miles, hundreds of gallons of gas, and 300 cups of coffee but we finally did it. Lisa bought a single family residence and the rest is history.
When I started selling Real Estate in 2004, everyone told me "Wow, its a great market right now, you must be doing well". I don't know about you but after 19 written contract offers for a client I started to question that statement. Sure the market was great if you were a seller. But in 2005 on average there were around 4,500 listings available in the Greater Orlando area. Now there is more like 25,000! I saw the market shift in October of 2005 and was amazed at the rapid pace in which things started to change.
Absorption rate: The amount of time it takes for a particular real estate market to sell off its Active Listings (usually expressed in Months).
In 2005 the absorption rate for Orange and Seminole County was about 1 to 1.5. That meant that from the time that the property was listed to the time escrow was closed was a month to a month and a half. The average contract time period is 30 days. That means that homes were selling in days or weeks.
Fast Forward to the present: Absorption rates (in months) Orange County 15.89, Seminole County 10.13. It would take more than a full year for Orange county to sell off all of its inventory (if no more new listings were put on the market)!! It would take Seminole County 10 months!!
Now, does it really take that long to sell a home? It depends. The Orlando Regional Realtor Association says that the average sales time is about 90 days. So why are the absorption rates so high?
It's because most homes are not selling at all!! Some are expiring, some are re-listed, some are withdrawn from the market, and as I'm sure everyone knows by now Many are being foreclosed on by banks.
Buyers have seen more negotiating power with sellers than they've seen in the past 20 years. They are negotiating price, terms, seller concessions, seller held 2nd mortgages and sometimes all at the same time.
However, I have been watching these numbers on a weekly basis for quite some time now and have noticed a change in pattern. Over the past year and a half (since October 2005) absorption rates have been increasing steadily from week to week and month to month. But some counties have seen improvements.
Seminole County's absorption rate has decreased by 14.53% since March. Lake County has gone down by 6%. While the other counties have continued to increase, this information indicates that another change may be coming our way. New construction sales are down, new home starts are almost non-existent and interest rates are still historically low but climbing.
I think that we are going to see a shift back to a more even market in 2008, which means if you're looking to buy, now's the time. It's much better to negotiate with a seller in a down market than in an up market.
If you are a seller, don't worry, you can still sell your home, however the rules have changed. Consult a REALTOR before listing your property, and remember that putting money into your home before selling will greatly decrease the amount of time it takes to sell.
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