Last night I met with some new clients who were delightful (you know who you are if you're reading this!)... a topic came up that comes up a lot and I felt was worthy of discussion today - The media is ALL over the idea that it's a buyer's market - but what I'd like to remind you is that real estate is local, it's really hyper-local. What does that mean?
First, we need to define what IS a buyer's market? The economic definition of a buyers market reads like this:
A buyer's market is a market for a good where prices are falling and there are more parties interested in selling than buying.
OK - that makes sense. But how does it translate to real estate? Typically we look at absorption rates - or simply put, how long will it take to sell through our current inventory of homes. I found another definition which generally follows what I've always heard which is this:
A seller's market is defined by absorption rates of 1-4 months
A normal market is defined by absorption rates of 5-6 months
A buyer's market is defined by absorption rates of 7+ months
One very important factor to keep in mind is that numbers can swing wildly month by month because you are looking at 1 month in a bubble. I'm sure a learned economist might take exception to the quick and dirty, back of the napkin numbers we're looking at here, but nonetheless I was fascinated by what I found.
So, when I sat down this morning to pull together some facts and figures to share, before I even got started, I figured I'd find that in the closer in markets where things haven't been in a nose-dive decline, that I'd find lower rates and in markets that are saturated with inventory, I'd find that buyer's market conditions really exist. Take a look at the chart below. I had ordered it loosely by geography - distance from the city.
At first glance I was surprised to see the LOWEST absorption rates in Manassas - now I don't do a whole lot of business out in Prince William County - most of my business is done in the closer in areas of Arlington, Alexandria, Falls Church and the like... I was a little surprised by McLean's super high rate of 16+ months of inventory, but then, it all made sense. Look at the chart below, re-ordered by average list price in that city.
Interesting, huh? With the ONE exception of Falls Church, it lines up EXACTLY with average selling prices. What this tells me is that in areas with reasonable prices, properties are selling - at a very good pace in most cases. This ALSO tells me that with a few exceptions, our metro area is largely within the "normal" ranges - it's what I've been saying, but here are the numbers to show for it.
The other interesting thing I found while researching this morning is that it really doesn't matter what you label things (e.g., market conditions, outside factors, etc...) - what matters are 3 things:
1) low asking prices
2) acceptable interest rates and
3) large inventories
So there you have it - as a buyer, please don't think you are driving the boat - that you can get whatever you want and then some from today's sellers. Likewise, as a seller, recognize a good deal when one comes along. Work with the buyers and their agent, be flexible and realistic. Hey, it sounds like I just described a "normal" market.
Give me a call if you'd like to discuss further - it's truly a fascinating study.
Happy Thursday
Jennifer
Serving all of your real estate needs in Arlington, McLean and the entire Northern Virginia Region!
Contact me today for a free home valuation or buyer counseling session! And remember, spring is RIGHT around the corner!
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