Another stat you could use is the absorption rate. Active listing divided by the average monthly sales. If you keep track of this you will be able to tell when a change is coming. I will give you an example:
East Baton Rouge Parish is my subject area.
Active listings 2718
Sold for the past 6 months 3196/6=533 (to figure monthly sales by number of months)
Sold for the past 3 months 1359/3=453
There are 2718 active listings.
During a 6 month period there were 3196 sold properties. Divide 3196 by 6 to get montly average or 533. Then divide 2718 by 533. 5.1 if you round up. This means there are 5.1 months of inventory or it would take 5.1 months to absorb the current inventory based on past sales.
Now lets compare to 3 months.
1359 divided by 3 is 453. 2718 divided by 453 is 6. Meaning there are 6 months worth of inventory out there. 3 months is more current than 6 months and it is taking longer to sell meaning the market has slowed in the last 3 months. When you see the 3 month number has fewer months than the 6 month number, you know you are on the rise!
It's important to see a sustained trend of at least 3 full months of momentum change. Gilbert would need an inventory drop and an increase in buying activity for the current trend to change. At some point banks and builders will find a bottom and pricing will flatten out. Many people debate about the validity of absorption rates ( The amount of homes available divided by the number of homes closed in a month ). When that number is consistently around 6 months of inventory we will start to flatten out. It will take a while for our current inventories to be absorbed, a long while. Right now Gilbert invenory is around 13 months with 2750 homes available and averaging a little over 200 sales a month the past two months. These numbers do not include new home construction and some of the builder "spec" or "inventory" homes.
If you wait until all that happens, many of the great deals will already be gone. Many buyers wanted a buyer's market and now it's here. Do not wait. Many sellers waited and waited to find the peak. For those who waited too long, the opportunity is now gone.
As a Realtor serving Gilbert I utilize The Cromford Reportâ„¢, which is updated daily and provides detailed information for tracking the history and current status of the Metro Phoenix residential resale market. The site offers distinctive insight into its future direction.
If you have any other questions email MLauraRealty@gmail.com
Coldwell Banker Residential Brokerage