Brecksville Ohio Real Estate Market Conditions Report - April 2010

By
Real Estate Broker/Owner with Olsen Ziegler Realty

Here are the April 2010 real estate market statistics for the Brecksville, Ohio community in Northeast Ohio

Absorption Rates and Months Housing Supply

These two terms are one piece of the puzzle to help real estate agents, appraisers, home sellers and buyers alike make sense out of the real estate market.

This is a little-known, but effective tool, if used in proper context, to help a home seller or buyer understand the market conditions for the home they wish to sell or buy.

The easiest way to define these two terms is with an example:

Absorption Rates (AR)- The rate at which homes are selling (ie. absorbed), over a specific time period, typically 12 months.  This is beneficial in determining supply and demand trends for the local market.

Months Housing Supply (MHS) - How long it will take, in number of months, for all the current homes for sale to be sold.

Formulas:

Monthly Absorption Rate = # of homes sold in the past twelve months  / 12 Months.

Months Housing Supply = # of currently active homes for sale / Monthly Absorption Rate

Reference Guideline:

# Months to Sell            Type of Market

              1-4                      Sellers

              5-6                      Balanced

              7+                       Buyers

Note: Six (6) months of inventory is considered a balanced market.

As is true with everything statistical, one has to really know when to apply this tool, under what circumstances is it relevant, and what are the constraints, as with everything in real estate, no individual property fits neatly into a box (no pun intended) or equation.

Here are a few examples of a few constraints:

  • Seasonal fluctuations - If more homes sell in the spring and summer months, what should the sampling period be?
  • Expired Listings - How should listings that have expired and been re-listed be treated?
  • Selecting Active and Sold Homes - What homes should be selected?  What criteria should be used?
  • Selecting the AR Time Period - Is 3 months enough?  6?  12? 
  • Is there a negative or positive trend underway?  How do you compensate for the trend?
  • Since these are median #s, how does my home relate?
  • What can I do to make my home defy the median?
  • Do watershed events (say...the October 2008 Economic/Credit/Housing meltdown) affect: time periods?  the statistics themselves, the subset of homes selected, etc.?
  • Is new construction affecting the supply or demand of nearby properties?

A question that sellers typically raise after reviewing this information:

Does this mean my home will take 20-24 months (Median MHS) to sell?  While there is no easy answer here, the answer is: It depends.  Many factors go into how quickly or long a home will sell.  See my post titled "Your home is worth whatever a buyer is willing to pay for it" which talks about the many factors to consider when selling a home.  We sell homes that defy the median, and are at the low end of the statistics when sellers listen to our advice and adopt our home preparation, staging and pricing considerations. While nothing is guaranteed, it's all about maximizing your opportunities relative to your competition and constraints.

Using a concrete example below, taken from the Northeast Ohio MLS, this report was run for the City of Brecksville, all single-family homes, so to see what is happening in the community as a whole:

Brecksville Ohio Real Estate Market Report April 2010

Source: NEOHREX. Information deemed reliable but is not guaranteed.

A couple of observations from looking at the above table:

  • The MHS is much higher than a balanced market, so the current market (and true as well over the past year) favors buyers.
  • Sales are down in the current quarter, which is a bit of a disappointment considering the federal tax incentives were active for most of this quarter.  

Note:  This is an example at a community level.  The selection criteria would be customized to be relevant for a given property so as to make the data more meaningful.

Note:  As of 4/1/09, Fannie Mae is requiring appraisers to compile the information you see above to be used as a part of a Market Conditions Addendum for appraisals.

Olsen Ziegler Realty -- A $marter Way to buy and sell your Brecksville, Ohio Home

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Rainer
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David North
Coldwell Banker Bain - Duvall, WA
for a rewarding real estate experience

Chris, I make a practice of randomly selecting markets other than the Greater Seattle real estate market where I work, and checking in to see what is happening in those markets and how the professionals who work in them, communicate market conditions.  I like your report a lot, and feel like I've learned a little about your market.  Thanks!

May 09, 2010 04:27 PM #1
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Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"

Chris  Excellent - you explain it so they can understand the report - too often we forget the public is not familiar with the terminology

May 11, 2010 03:22 AM #2
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Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Excellent explanation of Absorption rate pricing.  Looks like quite a bit of inventory in your neck of the woods!

May 16, 2010 10:09 AM #3
Rainmaker
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Robert T. Boyer
FHA Loan, VA Loan, Jumbo Loan,FHA Loans,VA Loans,Jumbo Loans - La Jolla, CA
San Diego Real Estate & Mortgage Loans, Ph.D. | VA Home Loan

Hi Chris, I am deep into the analysis of markets and always trying to better understand what makes things tick.  I have found a breakdown by price level to be very enlightening because it showed that we had three distinct markets in our area.

Is the format you are showing the one FannieMae requires?  I find it interesting and useful, but it would seem to faily miserably with the annual cycle.

Aug 11, 2010 05:01 PM #4
Rainmaker
564,419
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi David -- I do the same, and I always learn something as well! :)

Hi Karen -- Very true.  I even hear a term on here that I haven't heard before.

Hi Renee -- Yes, unfortunately for sellers.

Hi Robert -- Yes, it is the Market Conditions Addendum Fannie Mae requires.  I think the historical period provides a glimpse into a prior selling period, and you are right in some aspects.  That said, some local markets are very sensitive to the spring-summer peak selling seasons and some aren't.  There are so many variables, like the expiration of the tax credits that throw historical analysis somewhat out the window. Change never ends.  Demand-Price-Condition is what a seller should focus on to get one buyer, regardless of market conditions.

Aug 26, 2010 02:51 PM #5
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Chris Olsen

Broker Owner Cleveland Ohio Real Estate
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