It's a Buyer's Market, Isn't It?
With all the doom and gloom news about the real estate market, it's easy to assume that it's a buyer's market. In fact, many buyers figure that they can put off making homebuying decisions, make outrageous lowball offers, or be as unreasonable as they want to be because they think it's a buyer's market.
Maybe it is and maybe it isn't.
It all depends on what market you are in. But before we look at the different markets in our area, let's agree on what a "buyer's market" actually is. While you may find somewhat different numbers out there, most often people will say that
1-4 months of inventory = Seller's market
5-6 months of inventory = Neutral market
7 or more months of inventory = Buyer's market
To determine how many months of inventory there are, we need to calculate the absorption rate, which is the length of time it will take to sell the existing inventory, given how many houses were sold in the prior month.
So we need to know how many houses are currently on the market, including those under contract and those under deposit; we also need to know how many houses sold in the past month.
Here are the absorption rates for some of the towns in my service area:
| Town | On the Market | Sold Last Month | Absorption Rate |
| South Windsor | 99 | 26 | 3.8 |
| Manchester | 248 | 29 | 8.5 |
| East Hartford | 268 | 21 | 12.76 |
| Vernon | 113 | 13 | 8.6 |
| Tolland | 91 | 9 | 10.1 |
| Ellington | 100 | 9 | 11.1 |
| Coventry | 91 | 10 | 9.1 |
| West Hartford | 231 | 41 | 5.6 |
| Glastonbury | 170 | 26 | 6.5 |
This information is for single family home sales as reported in the MLS, and absorption rate is reported in months. As you can see from the information, most of the towns would represent a buyer's market. Glastonbury and West Hartford are neutral markets and South Windsor is a seller's market.
However, we can narrow this down in any number of ways that will prove to be more useful. We could calculate the absorption rate by price range, by school district, or by neighborhood.
We would see, for example, that in the price range of $150,000 to $200,000 in Manchester (104 on the market/9 closed sales in December) the absorption rate is 11.5 (a buyer's market), but in the $250,000 to $300,000 (18 on the market/3 closed sales in December) the absorption rate is 6 months (a neutral market).
Absorption rates can explain a market or help inform a decision, which is useful to buyers as well as sellers, but it is just one piece of information. A well-priced home is the most important factor and can defy trends in absorption rates.
If you are interested in getting more information about absorption rates in your neighborhood, please contact me.
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Peggy Chirico, REALTOR®
Serving the Greater Hartford Area
Prudential CT Realty
peggychirico@gmail.com
860-748-8900
If you are buying or selling a home in Hartford County or Tolland County, please call me, email me, or visit my website. I would be happy to help you with your home search or provide a market analysis for your home.
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Peggy, this is a great post and so appropriate for our current times. Buyers, and sellers for that matter, need to understand these factors going into the process.
Good post. I like the way you explained the difference and gave examples. I will link back to you in a future post.
Great explanation. Sellers need to know how long it will take, realistically and based on facts, to sell their homes. And buyers need to know how much leeway they have to "play".
Hi Jason - I agree with you on the importance of letting our buyers and sellers know as much about the market as possible.
Hi Mary - Thanks and thanks for offering to link!
Hi Crystal - I appreciate your comments.
Peggy, great market report to make us all think about the market. It is THOUGHT to be a neutral (normal) market in Denver. Nice presentation!
Thanks, Joan - You are lucky to be in a neutral market!
It looks like a good time for bargain seeking home buyers in your markets. Best wishes for a most productive winter.
This is a most excellent idea for a chart to show how it all differs from neighborhood to neighborhood! Love the presentation and idea Peggy!
Thanks, Roy - Beautiful picture!
Hi Renee - Thanks for checking it out. I think I will do more along these lines as well.
Love that you define buyers market/sellers market... I always know these stats & forget to educate my clients on what that means :) Great job Peggy!!!
Thanks, Christina! I think it helps buyers and sellers when they can put everything in perspective.