I am a firm believer in pricing homes based on the absorption rate. Essentially, the absorption rate tells how many months of available home supply we have. So why does the absorption rate matter on this market update? Everything is selling fast, and the absorption rate is what drives the market.
Through the years, I have told sellers that we have to have the best price and value to close in 60 days. I have rarely met a seller who wanted or needed to sell a home and didn’t want it to sell for top dollar, as soon as possible. Selling a home still is extremely inconvenient for most!
I believe a neutral market would have about a three- to five-month supply of homes available. This is where we “lived” for about five years. In the neutral market, buyers and sellers genuinely had to put their best terms forward in negotiating a sale. Sellers painted, cleaned up, and made sure that everything was in good order before they tried to sell; buyers were ready to pay a fair price and come to the table to find a place that worked for them.
A buyer’s market would have approximately a six-month or more supply of homes. This is the market where buyers can have everything they want to be fixed, changed, repaired and the seller will even give you all your closing costs if you will just buy the home and save them from the stress of selling!
I am sure that I don’t have to explain what a seller’s market looks like. We are all living it out in real-time. I do want you to pay attention to the absorption rate and understand why it matters. When this starts to shift, you can expect the market to be better for both buyers and sellers!