If you are a number cruncher - you are going to like today's post. Looking at some early numbers from the Great Cincinnati Multiple Listing Service we can determine what our Absorption Rate is, (Absorption Rate is the time it will take to sell the current amount of inventory based on current sales activity). Based on these early numbers from our MLS, we can determine how many months it will take to sell all the homes currently listed for sale by REALTORS®. It is important to note, that inventory numbers can go up or down at any time, which is why it is important to review these numbers month to month.
Why, you ask? Well, it's that math that you swore you would never have to use, and it helps us to determine trends in the market. The numbers I've looked at are for the overall market in Cincinnati, so while it gives us a snapshot of homes for sale in Cincinnati, it is a view from 10,000 feet - so to speak.
For these calculations I'm looking at Residential Sales, or Single Family Homes and Condos specifically. So far in 2010 we have sold 12,144 of these. That's 1,518 properties sold per month on Average. Taking into account our current number of Homes for Sale of 14,985 it will take us 9.87 months to sell through the current level of inventory. At the end of July, 2010 we were looking at over 12 months worth of Inventory. In the past month or so, we have seen a decline of homes for sale - folks taking their homes off the market, less inventory, lower absorption rate. But I believe this number will climb to much higher than 12 months by the end of the year.
Now, some perspective on that 9+months:
According to the National Association of REALTORS® a 6 month supply is considered a "balanced market", or one where there are an equal number of properties for sale as there are buyers. This type of market would show a stabilization of home prices as well as Days On Market. Over 6 months is considered a "Buyer's Market", essentially inventory is high compared to the number of buyers. In this type of market; like we're in now, we typically see declining prices and longer times for homes to sell. Under 6 months is considered, yep you guessed it, a Seller's Market. We experienced that in the 90's up until about 2006. You remember, homes selling so fast it would make your head spin, bidding wars, buy a house now at $150,000 to sell it two years later at $200,000. Allowing home owners to pull equity out of their homes and now that home is worth $125,000 - which makes it difficult to sell.
This makes pricing your home even more important! Take the time to plan ahead and have your REALTOR® calculate the Absorption Rate for your specific area. Real Estate is Local - in fact it's Hyper-Local. Prices and rates between local school districts and even neighborhoods can vary greatly. If you want the facts - ask a REALTOR® - HEY ask me!