Saturday, November 29, 2014 / by Nicole Solari
Is it a Buyer’s Market or Seller’s Market? Understanding Solano County, CA Absorption Rates.
How can you determine whether it’s a buyer’s market or a seller’s market? By looking at housing market absorption rates.
The Market Absorption Rate, also known as months of supply, measures the number of months projected to deplete the existing inventory of homes based on the current monthly sales, assuming no new homes will come on the market. It is calculated by taking the total number of active listings and dividing by the number of homes that have gone under contract in the last 30 days and is expressed in months to sell.
Figuring Absorption Rates:
1) # of listings on market = X
2) # sold last month = Y
3) (Y) x 12(months)= Z
divide: Z/52(weeks) = units sold per week
divide: # of listings on market (X)/units sold per week
Now let's look at Solano County's absorption rates...
In a Normal Market homes generally take between 5-6 months to sell. In a Seller's Market, like the one we are in now, homes sell more quickly. In a Buyer's Market, homes take longer to sell.
There is a direct correlation between market absorption rates and property values. As absorption rates increase beyond a normal level of 5-6 months, property values go down. And as they decrease below the normal level of 5-6 months, property values go up. More simply said, lower inventory yields higher demand and therefore drives the prices up.
In Solano County, the current residential absorption rate is about 11.43 weeks or a little less than 3 months. This is still relatively low which means we are technically in f you have a home to sell, now is the time as buyers are plenty and homes are few. So if your house is on the market, priced right and in good condition expect multiple offers!
Buyers, you should also be prepared for multiple offers, as many of the available homes today are getting at least 3 offers. With this much competition among offers, your first offer should be your highest and best. The days of lowballing and getting a huge deal on a home below market value are pretty much gone unless the property needs a lot of work. (see my blog post How to Win a Bidding War)
The good news for buyers is even though it's a "seller's market" interest rates are historically low! Whether you're buying or selling a home make sure you're working with a Realtor® who knows the market and can help you negotiate! If you're looking to buy or sell a home call me and I can help you get started today!
Nicole Solari, Realtor®
Never too busy for your referrals...