Is It a Buyer’s Market?

It’s a Buyer’s Market, Isn’t It?

With all the doom and gloom news about the real estate market, it’s easy to assume that it’s a buyer’s market.  In fact, many buyers figure that they can put off making homebuying decisions, make outrageous lowball offers, or be as unreasonable as they want to be because they think it’s a buyer’s market.

Maybe it is and maybe it isn’t.

It all depends on what market you are in.  But before we look at the different markets in our area, let’s agree on what a “buyer’s market” actually is.  While you may find somewhat different numbers out there, most often people will say that

1-4 months of inventory              =     Seller’s market

5-6 months of inventory              =     Neutral market

7 or more months of inventory    =     Buyer’s market

 

To determine how many months of inventory there are, we need to calculate the absorption rate, which is the length of time it will take to sell the existing inventory, given how many houses were sold in the prior month.

So we need to know how many houses are currently on the market, including those under contract and those under deposit; we also need to know how many houses sold in the past month.

Here are the absorption rates for some of the towns in my service area as of January 12, 2011 (based on December’s closed sales):

Town On the Market Sold Last Month Absorption Rate
South Windsor 99 26 3.8
Manchester 248 29 8.5
East Hartford 268 21 12.76
Vernon 113 13 8.6
Tolland 91 9 10.1
Ellington 100 9 11.1
Coventry 91 10 9.1
West Hartford 231 41 5.6
Glastonbury 170 26 6.5

 

This information is for single family home sales as reported in the MLS, and absorption rate is reported in months.  As you can see from the information, most of the towns would represent a buyer’s market.  Glastonbury and West Hartford are neutral markets and South Windsor is a seller’s market.

However, we can narrow this down in any number of ways that will prove to be more useful.  We could calculate the absorption rate by price range, by school district, or by neighborhood. 

We would see, for example, that in the price range of $150,000 to $200,000 in Manchester (104 on the market/9 closed sales in December) the absorption rate is 11.5 (a buyer’s market), but in the $250,000 to $300,000 (18 on the market/3 closed sales in December) the absorption rate is 6 months (a neutral market).

Absorption rates can explain a market or help inform a decision, which is useful to buyers as well as sellers, but it is just one piece of information.  A well-priced home is the most important factor and can defy trends in absorption rates.

If you are interested in getting more information about absorption rates in your neighborhood, please contact me.

 

Peggy Chirico, REALTORĀ®
Serving the Greater Hartford Area
Prudential Connecticut Realty

If you are buying or selling a home in Hartford County or Tolland County, please call me at 860-748-8900, , or use the Contact Request Form.  I would be happy to help you with your home search or answer any of your real estate questions.

Find your dream home now!

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