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Understanding the Market

Determining a Buyer’s, Seller’s, or Balanced Market Condition:

  • The Absorption Rate & Current Inventory are good indicators of whether we are in a buyer’s or seller’s market.
  • In general, less than 3 months of inventory indicates a seller’s market & more than 6 months of inventory indicates a buyer’s market. 3 to 6 months of inventory indicates a balanced market.
  • When in a seller’s market, you have the luxury of pricing slightly high, because buyer’s have a lack of selection.
  • When in a buyer’s market, it makes sense to price competitively, because buyer’s have many options.

Calculating Absorption Rate & Inventory:

Absorption Rate = # Solds / # of Months

Absorption Rate is the average # of sold properties per month.

Months of Inventory = # of Properties on the Market / Absorption Rate

Inventory is how long it would take for all current properties to sell, given the current Absorption Rate.

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