Is anything selling?
When will the market come back?
I’m asked each of questions on a daily basis. Nearly all of us have an interest in the housing market, what’s happening now and where the market is heading.
There’s no single answer that addresses each of these questions, it really does depend on your perspective. If you are thinking of buying a home you’re probably interested in different information than if you were preparing to sell.
Absorption Rates: Supply vs. Demand
One measure of the current real estate market condition is the absorption rate. The absorption rate is generally defined as the number of months it would take to exhaust (or absorb) the supply of all homes on the market at the current rate of sale.
While is certainly useful data to a home shopper it’s likely more useful to a home seller. The more homes for sale in your neighborhood, the lower your chances of selling. If your neighborhood has a lower absorption rate than the surrounding areas your odds are statistically better.
This chart displays the current absorption rate for all of Clatsop County, single family listings only. For reference many economists agree that an absorption rate of 6 months is a balanced market, the further you move above 6 months the more you move into a buyer’s market.
Absorption Rate (in Months)
Median Sales Price
The median sales price is misleading in many ways. The median average sales price represents only the median average of homes sold in that month, not that value of all homes. A median average that is decreasing over time might be caused by a larger number of lower priced homes being sold, and is not necessarily a leading indicator of value for all homes.
Bank owned homes, or REO’s, will have an effect on the median sales price for an area from one month to the next. When you have a handful of these homes sell in a single month for much less than owner occupied homes it will put a dent in the median sales price for the month.
For this reason it’s not uncommon to see the chart below dip one month and climb the next. This chart shows the average median sales price of homes sold in the previous 12 months for the entire county.
Sold Median Sale Price (in Dollars)
Inventory, or the number of homes for sale at any given time doesn’t need much explanation. When the chart trends up, the number of homes for sale has increased. When the chart goes down, well you get the idea…
Number of Active Listings
The Bottom Line: All Real Estate Is Local
As the saying goes real estate really is local. National statistics don’t paint an accurate picture of what’s happening on your street or in your town, and neither do county wide figures. Location and price range will greatly impact what’s happening today in your neighborhood. Certain market segments have been much stronger than others, maintaining values and see constant demand. Other segments have gone from bad to worse.