absorption of inventory - how long?

By
Industry Observer with Howard Sumner Consulting

Time it will take for Inventory to be “sold” or absorbed in the market

One question I get asked is how the market is doing. There are many ways to answer the question, yet I believe one the best is looking at absorption of the inventory by the market and the relation of pending sales to the active inventory.

So first let’s look inventory and the rate at current levels of sales how long the market will take to absorb or “buy the inventory”.

As of this morning June 20th 2016 there are 550 “homes” on the market (the first column). I believe the best way determine how long the market will take to “buy the inventory” is go back and see by pending date how far back it took to find that many closed transaction. As of this morning I had to go back 149 days (fifth column) or basically 5 months to find closed sales that balanced against the inventory 551 closed home sales (third column). Of the 551 homes that have closed it took an average of 43 days (sixth column) to obtain a purchase agreement to get the home sold. Two other pieces of the market information are pending sales (second column) and properties that did not sell (column four). In terms of pending sales a percentage of those will not close (about 20% do not close) and the off market or did sell tell in the 149 days actually 971 homes will be “on the market” to get those 551 closed sales.

 

 

This second chart is the relation of active listing to pending sales it is express in percentages. It shows me the overall “strength” and direction of the market. So to read this, right now if 1000 homes were on the market there would 640 pending sales. It appears this year we peaked early in the spring at 74% and last we peaked at 84%. You can see from the chart during the summer months active/ pending inventory are relatively stable in their relationship then trails off in the late fall. The other take away from this chart is contrary to popular opinion there is actually more inventory in relationship to sales then there was last year.

 

Hope you find the information useful and interesting if you have any questions give a call or email.

 

 

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