A buyers market is when there is more than 7 months supply of homes in a given market, a sellerâ€™s is when there is less than 6 months supply of homes in a given market and 6 months supply is called a neutral market.
So how do you determine how many months supply of homes on the market?
A market is any given set of parameters. Area, Price Rangeâ€¦
So once you pick an area, a price range
Then you determine the #Â Active Listings
Then add theÂ Sale Pending and theÂ Sold listings for the last 60 days
Divide that number by 3, then divide the active listings by it.
Â - May 20. 2012
Lets look at 3 counties: Â Sacramento, El Dorado Placer, all price ranges
3520 Active Listings
8881 Listings that have a sale pending, or active short contingent
5195 listings sold in the last 60 days
We add the Â (pending) and Â (sold 60 days back) and get 14,706.
We divide the 14,706 by 3 = 4692
Then we divide 3,520 (active listings) by 4692 = 22 day Supply of homes.
Based on that we have a extreme sellerâ€™s market.Â
Narrowed to 3 zip codes: The Folsom/ Granite Bay/ El Dorado Hills Month supply of homes
Actives and short sales: 329
Pending and short contingent 562
Sold (60 days back) 380
We add the Â (pending) and Â (sold 60 days back) and get 942.
We divide the 942 by 3 = 314
Then we divide 329 (active listings) by 314 = 32 day Supply of homes.
Statistically an extreme sellers market.
For the $300,000 to $700,000 price range for all 3 counties:
We add the Â 1383 (short contingent + pending) and 962 (sold 60 days back) and get 2,345.
We divide the 2,345 by 3 = 781
Then we divide 1194 (active listings) by 781 = 46 day Supply of homes.
Also a very strong sellers market.Â
Want a buyers market? over a million snickerdoodles there are 168 listings. 21 sales (60 days) 30 pendings. Â 168 /17 <= Â 10 month supplyÂ Â
This extreme sellers market has developed very quickly over the springtime of 2012. Â One must expect that more inventory will arrive on the market over the next few months to take advantage of the rising prices. "Laws" of real estate economics predict price increases to accompany and follow supply and demand imbalances such as we are Â currently seeing. Â Traditional market analysis tools such asÂ comparativeÂ market analysis of recent sold comps, are counterproductive to buyers and buyers agents because they direct our clients to offer prices that are too low to be accepted. Listing agents that rely on sold comps to determine asking price are deluged with dozens of multiple offers.Â Even with overbids, there is a chance that underlisting a property may leave some money on the table that might have otherwise flowed to the sellers bottom line.Â
IÂ feel that reliance on recent comparable sales and pending contracts for pricing guidance is leading us to an inaccurate current valuation for currently listed properties. So is this talk a ploy? Well if you don't ploy you don't play! Â What seller acting in her own rational economic interest will accept a lower offer because it is based on comps when there is a higher offer on her property from someone who thinks comps are just yesterdays news?
Pricing a listing correctly, or figuring how much to offer has always been a little bit art, a little bit science, some statistical analysis, some psychology, and a little bit of voodo from a Â gris gris bag.