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.
