Here is a great way to get your listings priced right in any market. Showing your sellers cold hard facts makes it hard for them to argue.
Obviously every agent does a Market Analysis, but I would bet that very few know how to calculate Absorbtion Rate and Months of Inventory. The Absorbtion Rate/Months of Inventory caluculation is a great tool to help show the real market conditions and to get listings priced correctly.
Absorbtion Rate
Absorbtion Rate is an estimate of the speed at which a particular classification of housing will be sold or occupied each month. You can calculate a property's absorbtion rate based on houses matching the following criteria:
Area/Neighborhood ____________
Style of House ____________
Age of House ____________
Size of House ____________
Price Range ____________
Other _____________
Other _____________
Using the above data, the Multiple Listing Service (MLS) reports that there were _____ # of houses sold in the last _____ months. (I usually use 6 months)
If you divide the number of sales by the number of months, this tells you how many homes the market is absorbing each month (monthly absorbtion rate).
______________________ / _______________________ = ______________________
Number of Sales Number of Months Sales Per Month
Months of Inventory
Using the Absorbtion Rate data and criteria above, you can now calculate how many Months of Inventory there is on the market for houses meeting that criteria.
The MLS reports that there are __________ # of houses currently for sale (Active Listings) that meet the criteria. Dividing the number of Active Listings by the number of Sales Per Month tells you how many Months it will take to sell the Existing Inventory.
_________________________ / __________________________ = __________________________
Number of Active Listings Number of Sales Per Month Number of Months Needed
To Sell Existing Inventory
Then you can graph it the following way.....
Seller's Market Transitioning Market Buyer's Market
0 1 2 3 4 5 6 7 8 9 10 11 12
Months Needed To Sell Existing Inventory
Go to http://www.BuyAndSellAZ.com/ for all of your Real Estate needs.
John Karadsheh is a Certified Residential Specialist, an Accredited Buyer Representative, a Multi-Million Dollar Producer, Relocation Certified and has been a resident of Arizona since 1978.
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