How many months' supply of homes are currently on the market and what does that tell us about the health of the Denver real estate market?
I wrote an earlier post, Translating Denver Days on Market, reporting what the average number of days each home was on the market before it was under contract and what that means to people considering a sale. Another way to measure the health of our real estate market is to compare how many months of supply are on hand, or absorption rate (AR). The larger the supply, the more competition there is for sellers and the higher likelihood that prices will drop or concessions will be offered.
For a great overview of Absorption Rates, check out Keith Jeppson's article, Buyers or Sellers Market? Absorption Rate is the Key! Keith is a wonderful Realtor who blogs out of Salt Lake City.
More Months of Supply = Buyer's Market = Possible Reduced Prices and/or Concessions Fewer Months of Supply = Seller's Market = Possible Price Increases and/or Bidding WarsThe commonly accepted separation between markets is:
Seller's Market 1-4 months of supply
Neutral Market 5-6 months of supply
Buyer's Market 7 months and above
Area | April AR | May AR | June AR | Avg. AR | Market Condition |
Aurora North | 8.83 | 9.32 | 7.04 | 8.40 | Buyers |
Aurora South | 5.66 | 4.86 | 5.30 | 5.27 | Neutral |
Broomfield | 5.88 | 5.05 | 4.32 | 5.08 | Neutral |
Douglas Cnty West | 6.93 | 6.18 | 7.88 | 7.00 | Buyers |
Douglas/Elbert/Parker | 6.29 | 6.06 | 6.05 | 6.13 | Neutral |
Highland Ranch/Lone Tree | 3.52 | 2.90 | 2.71 | 3.04 | Sellers |
Denver Northeast | 6.01 | 5.30 | 6.00 | 5.77 | Neutral |
Denver Northwest | 5.03 | 4.19 | 3.54 | 4.25 | Sellers |
Denver Southeast | 4.74 | 4.29 | 4.71 | 4.58 | Sellers |
Denver Southwest | 8.13 | 7.05 | 6.21 | 7.13 | Buyers |
Jeffco Central | 6.63 | 5.18 | 4.88 | 5.56 | Neutral |
Jeffco North | 7.29 | 4.61 | 3.90 | 5.27 | Neutral |
Jeffco South | 5.05 | 4.23 | 3.74 | 4.34 | Sellers |
Jeffco West/Golden | 5.86 | 3.69 | 4.11 | 4.55 | Sellers |
Jeffco North Central | 5.01 | 4.23 | 4.30 | 4.51 | Sellers |
Jeffco South Central | 5.18 | 4.93 | 3.77 | 4.63 | Sellers |
AR=Absorption Rate or how many months of supply of houses on the market
We have a few areas of town that are moving towards a seller's market with Highlands Ranch and Lone Tree taking the lead with an average three month supply. Are we in recovery mode? We'll have to wait and see. It will take more than three months of statistics to make that prediction, but it appears things may be balancing out a bit.
Based on information from Metrolist, Inc. for the period of April 1, 2007 to June 30, 2007. Note: This representation is based in whole or in part in content supplied by Metrolist, Inc. does not guarantee nor is in any way responsible for its accuracy. Content maintained by Metrolist, Inc. may not reflect all real estate activity in the market.
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