There is so much newspaper and magazine print as well as television talk about Buyer's Markets and Seller's Markets but most Realtors don't take the time to educate the public on how the definitions are determined. The fundamental measure of market conditions is an absorption rate.
To define for the consumer an absorption rate, think of a method to use a mathematical equation to represent the relationship between supply and demand of property. The total available number of homes is divided by the number of homes sold in a certain period of time. My preference in reviewing absorption rates is on an annual basis. Therefore divide the number of homes sold in the last year in an area by 12 to calculate the number of homes sold in a month. Then take that particular area's current listings and divide by the number of homes that sold per month. This number should give you an idea of how many months it takes to sell a home in that particular area.
Average Market conditions are absorption rates of 5 - 6 months
Seller's Market conditions are absorption rates of 1 - 4 months
Buyer's Market conditions are absorption rates of 7 or more months
If you were to calculate the overall absorption rate of Glynn County, Georgia this number portrays very little as it applies to a specific home in Glynn County. (This is why news reporting around the country fails to explain that real estate is local even within the same city not national). If you want to calculate a value that is meaningful, then go to a specific subdivision or area.
To apply this usefully I used the Golden Isles Board of Realtor's statistics to perform a 12 months search of sales of 4 subdivisions solely to use as examples. Here are 4 examples:
Example Subdivision #1
3 homes for sale
8 homes sold in the last 12 months
Absorption: 4.47 months - rounds to Seller's market
Example Subdivision # 2
44 homes for sale
14 sold in last 12 months
Absorption: 37.6 months - Buyer's market
Example Subdivision #3
8 homes for sale
8 sold in last 12 months
Absorption rate: 12 months - Buyer's market
Example Subdivision #4
12 homes for sale
28 homes sold in last 12 months
Absorption rate: 5.15 months - average market condition
It appears from my research that Glynn County has average market conditions, buyer's market conditions and seller's market conditions - depending on where you wish to buy your home. Caution should be taken however - the absorption rate is not everything you need to determine the condition of a local market. Price, location, condition and specific market features (such as water frontage) are more likely to determine when a home sells rather than any other mathematical formula.
Due to the national news about market conditions, I believe buyers are misinformed about real estate in general. There is still a loan for everyone including those with less than perfect credit and with no money to put down. Find a Realtor and Lender that have both knowledge and compassion and will give you the support, information and the time you deserve when making the purchase of what is often the largest investment of your lifetime as well as the place you call home.
Comments (0)Subscribe to CommentsComment