The housing market cycles between being a sellers market, a buyers market and a balanced market. In the 1990's it was a buyers market. In the early 2000s it was a roaring sellers market. Starting in about 2006 the market collapsed and it reversed back to a buyer's market. Now it has transitioned back to a sellers market....at least for the time being.
1. The Inventory is low
The housing inventory is the number of homes that are on the market at a given time. It is important to know the total number and the number in your price range. If you are no sure, then if you are a homeowner, you can hire an appraisal. That will cost you a few hundred dollars. Better, contact an experienced real estate agent who can prepare a CMA - Comparative Market Analysis. If you do not have an agent, you can contact me and I will prepare a free CMA.
At the end of August there were only 1800 homes for sale in all of Montgomery County. If the trend follows last year, there will be only about 1200 in December.
Buyers: This indicator tells you that you need to be assertive in looking for a house now.
Sellers: This is an excellent time to put your house on the market. Traditionally the spring and the fall market are the best two times to sell your home. The last home our team sold, was only on the market 4 days before it went under contract.
2. There are many buyers out there who are having a hard time finding the right house
One of the reason's that buyers are having a hard time is because there are so few houses on the market. There are some other reason's as well which I will deal with in the next few headings.
3. When buyers find the right house, they often lose out in competition to those who write better offers
It is very frustrating to finally find a suitable house and you find that several other buyers are also interested. This is especially true if the home is in excellent condition, in a desirable neighborhood or school district, and especially if the house is well priced. Long and Foster and our team have experienced a numer of multiple offer situations this year and even if there are not multiple offers, they often are snapped up by other buyers who are tired of waiting.
4. The interest rates are moving up
Interest rates went extremely low - into the 3% range! I rememer when interest rates were approaching 20% on the mid 1970s. There are some buyers who are new to the market who are scoffing at the "high" rates in the 4% range. They are holding back waiting for interest rates to decline back. I do not believe that this is wise and in my opinion we are not likely to see rates in the 3% range for decades if ever.
If these reluctant buyer's see the error of their ways and enter the market this fall, then there is going to be even more competition for the limited supply.
5. It is harder for buyers to qualify for loans than in years past
This factor speaks to the quality of the buyers out there. If they have gone through the loan process and qualified to buy, then they tend to be very serious. If you are a seller, it is the type of buyer that you want. If you are a buyer, it is just the way it is. The recent housing crisis was in large part caused by lender's (at government encouragement) making loans to people who were really not qualified. Now the dial is set in the opposite direction and people who would ordinarily be qualified are not able to get loans.
6. My friends and family say that it is a buyer's market
Everybody likes to talk about the weather, politics and real estate. Everyone has an opinion. Some opinions are better than other's. You want to educate yourself on the fundamentals. Chances are if you are reading this blog, you are someone who is trying to figure the market out. In my opinion we were in an buyer's market, but now are in a seller's market. Why....keep reading
7. My friends and family say that it is a seller's market
If it is not a buyer's market it can only be either a seller's market, or a balanced market (a market that favors neither buyer nor seller). Balanced markets tend to be temporary as markets natually shift back and forth between buyer and seller markets.
8. The subjective element
Our opinion is the subjective element. It can be very strong. Realtors run in to it all the time with a sellers who is determined to get a certain price for their home. When market information is given to them, they resist it. Buyer's who must have a deal are the flip side of this. In a buyer's market, a deal may make sense. It a seller's market with lots of competition it is a recipe for frustration- for yourself, your mate and your real estate agent. There are two basic types of options: uninformed opinions and informed opinions.
9. The objective element
You gain an informed opinion through educating yourself about real estate - especially in Montgomery County, Maryland if that is where you are buying or selling - I am writing this blog especially for the Montgomery County market. We have already considered a number of factors, but I am leaving what I think is the most important one for last.
10. The absorption rate
The absorption rate is the number of homes that are being sold during a specific period of time. Right now the absorption rate for housing in Montgomery County is 3.65. That means that at the current rate of sales, it would take only a little over 3 months to sell off the entire inventory of homes. Some price points and some neighborhoods sell faster or slower, but over all that is the current rate.
These are the 4 steps:
1. Gather the number of homes that sold in the last 12 months. From 9/18/2012 - 9/17/2013 that was: 6245
2. Gather the number of homes that are currently for sale: 1896
3. To calculate the turn over rate: Divide the number of homes sold by the number of homes currently for sale: 6245 / 1896 = 3.29. There are 3.29 inventory turns each year 3.29
4. Divid the number of months by the inventory turns: 12/3.29 = 3.65. The current absorption rate 3.65 for all residental property (including single family homes, townhouses, condos, coops) is 3.65.
Note: The data to calculate the absorption rate is available to real estate agents. However, many agents do not know how to calculate this rate or do not believe that it is important. I would be glad to help you with this if you are having difficulty getting the information and would like to know.
Requested permission of: http://housesforsale.jennytherealtor.com.
Absorption Rate Key to Successful Pricing
This is the title of a article written on 11/14/2007 in the Daily Real Estate News, which is the offical magazine of the National Association of Realtors (NAR). In the article it states that when the absorption rate is at a 6 month supply it is a balanced market. Less than it would be a sellers market and more than that would be a buyers market. It is a good article and if you woud like to read it, here is the link: Absorption Rate Key to Successful Pricing.
Monthly Market Update from GCAAR
Click here: Single Family Homes for Montgomery County, MDAll local Realtors are members of the Greater Capital Area Association of Realtors (GCAAR). They have a website which publishes a month market information for single family homes and condo/coops. If you would like to have a current copy, then click on the links below:
Click here: Condos/Coops for Montgomery County, MD
Bill Osburn is an agent with Long and Foster, Rockvill Centre and is a member of the Ken Bowers Sales Team.
You can visit him at his website: www.MarylandHomeGuidance.com
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