STATE OF THE MARKET - PART 2

Let's take a look at absorption rates as they exist in our market today.

Absorption rates, for those who don't live and breathe real estate, is a calculation which measures "how long it would take to sell all homes on the market today at the current pace of sales". The technical calculation is the number of active listings today divided by the number of homes which went "under contract" in the past 30 days.

Here are current absorption rates, by price points:

$0 - $250,000: 4.22 months

$250,000 - $400,000: 12.66 months

$400,000 - $600,000: 18.23 months

$600,000 - $1 million: 41.40 months

$1 million and above: 67.08 months

Obviously, this is not a pretty picture for most segments of the market. The only area with any resilience right now is the sub-$250k market, which is mostly driven by discounted foreclosure inventory.

The stock market collapse last fall sent a chill over the traditional resale market. People instantly pulled back, became more cautious, and are waiting to see which direction things go under the new administration. The only area which wasn't really affected was the low end of the market, where investors and first-time buyers continue to compete for discounted properties.

So let's take a look at how absorption rates changed between October and January.

$0 - $250,000: 3.77 months to 4.22 months, an 11% increase
$250,000 - $400,000: 8.82 months to 12.86 months, a 46% increase
$400,000 - $600,000: 14.72 months to 18.23 months, a 24% increase
$600,000 - $1 million: 34.58 months to 41.40 months, a 20% increase
$1 million and above: 56.43 months to 67.08 months, a 19% increase

Turns out the softest spot in the market over the past three months is the $250,000 to $400,000 range, and it's not even close. This is where the fear is greatest in our market.

Whether you are a buyer or a seller, you need to know this piece of information.