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Well we are officially into the 2014 business year! Looking forward to the next few months, it is important to look back at the trends of 2013. One of the strong indicators of the low inventory is the market absorption rate. This is the calculation of available homes divided by the sold homes in one month, or how long it would take to sell the existing inventory. It is basically a snapshot, or balance sheet of our real estate market.
A balanced market should be an absorption rate of 6 months. We haven’t seen those kinds of numbers since the beginning of 2011. Through 2012 we saw absorption rates between 3.5 and 4.5 months showing the beginning of the tighter market, and where we saw it start to shift to favor sellers. When we got to 2013, those numbers fell even more to hover around 2.5 months, which ignited the multiple offer situations on most properties and competition on what little inventory there was.
For the beginning of 2014 we are still looking at an absorption rate of about 2.6 months, which is a product of the end of year weighted towards sellers, as well as the holidays and cold months. I will updated you again in the second quarter of this year, but I think that with the slow but inevitable increase in interest rates, and mores sellers wanting to try and take advantage of the sellers market, we will see more inventory come online for buyers to choose from.
Either way, there are strengths to being a buyer or a seller right now, so let me know if you have any questions or would like to discuss buying or selling a home!
