Who Has The Advantage In Todays Real Estate Market?
“How is the real estate market these days?” This is typically one of the first questions people ask after they find out that I have a real estate business. I often find myself huddled with a group of intrigued home buyers, sellers and owners all trying to understand what impact the market activity will have on their future decisions.
You have most likely heard a real estate market being referred to as a buyer’s or seller’s market. The idea follows the general principle of supply and demand – if there are more homes available than people wanting to purchase then the market is favoring buyers, if there are more buyers in the market than available homes then this is considered an advantage for sellers.
But how do we establish the number of buyers and homes in the market at any given time?
This is where working with a local REALTOR provides a distinct advantage for people looking to buy or sell real estate. Your REALTOR has access to home sale information via the MLS (Multiple Listing System) which they can organize to determine the market Absorption Rate.
The Absorption Rate
Absorption Rate represents the balance between the total number of homes closed in a prior period, typically one month, and measuring that against the number of current active listings.
Using the number of homes sold (and assuming that it was to stay the same) you can calculate how many months of inventory is in the market. We can then use this to identify how the market is trending.
0-3 months of inventory = Seller’s Market 4-6 months of inventory = Balanced Market 7+ months of inventory = Buyer’s Market
This general assessment is a good indicator of the market condition, but it should be applied differently when you are evaluating areas such as Sussex County. The hidden advantages for buyers and sellers in sensitive markets, such as a beach resort area, are only understood after a more focused evaluation of home sale history.
The Role of Your REALTOR
Your REALTOR will be able to offer better guidance by using an Absorption Rate that is based on similar priced, style and location of homes sold. By using these criteria, the Absorption Rate can be a better representation of the specific market that buyers and sellers are in.
It is not unusual to be in a buyer’s market for one set of criteria and a sellers market for another.
This may have a major impact on the decisions that buyers and sellers need to make. If a seller knows they are in a buyer’s market they may decide to be more aggressive with pricing and can anticipate on a longer list time. If buyers are aware they are in a seller’s market they may choose to position themselves more competitively by getting pre-approved and can anticipate paying close to list price (and possibly more!).
Your REALTOR should know the local market trends and what you can be doing to increase the chances of a successful outcome. Southern Delaware has seen a lot of activity over the past few years and it does not seem to be slowing down. This has made for a very competitive market and it is highly encouraged to partner with a trusted, local agent who can provide a crucial advantage.
Nitan Soni
The Nitan Soni Group
302-747-3333