State of the Market…
The market has improved markedly! That’s right the Real Estate Market has been improving steadily now for almost 10 months!
Are we at 2006 levels? No! Is it a new boom? No! Are prices increasing? No!
So then what’s so great about the market that you would say it has improved?
The parachute has opened!
This decided improvement in the market is a combination of several factors… Which is a really good thing! One factor improving doesn’t make for any real improvement… Even a couple of factors can be taken as a hiccup. Be when several factors trend positive for as long as we have seen these improvements, there are certainly signs for at least a cheer, if not a celebration.
While we look at our homes with a great deal of emotional attachment… Real Estate, as any market, is a supply and demand issue. Supply and demand are the first two critical factors that we look at when measuring the market. Lower Supply and Higher demand are positive factors when desiring an increase in prices (or a slowing of price decreases).
Residential Inventory July 2012
On the supply side: The Birmingham Metro Market has seen a decided decline in the number of properties for sale… Given equal demand this translates to more competition for homes, which would make prices trend higher.
This would obviously beg the question: So what is the demand?
Sales / Demand July 2012
While July sales were not at their highest level of the past 3 years (Remember 2009 & 2010 were both years in which we were offering home buyers a tax credit to buy a home… $6,000 and $8,000 respectively… those credits ended in June of 2010) the sales rates are at very respectable levels, only 4% off of last year’s pace while supply was off by 16%. The real measure is demand compared to supply. The ratio for these two factors is the strongest we have seen (for the past 6 to 10 months) that we have seen for the last three years.
When looking at the market, the strongest measure professionals use is one we call the Absorption Rate, which is the rate at which homes are selling. That number is computed by dividing the number of homes on the market by the average number of sales per month for the past six months. Using that formula we have an absorption rate of 8.7 meaning that if no other homes were put on the market, it would take 8.7 months to sell the existing inventory. This absorption rate is the best we have seen in almost six years.
A market is said to be a Seller’s Market if the Absorption Rate is less than 5 months. The market is considered a normal market when the absorption rate is between 5 and 7 months and a Buyer’s Market if the rate is greater than 8 months. So while this is still a Buyers’ Market it is trending toward a normal market. This time last year the absorption rate was 13 months.
Page 1 of 2 | Next page
