This week our listings saw an average of 1.3 showings each. Although we are in the midst of what is normally a spring/summer real estate surge, the market is not acting that way this year. There’s typically a winner and a loser in any market and it seems that right now, buyers are winning.
Prior to listing any home, I always take prospective sellers through an ‘Absorption Rate’ analysis to help them understand the state of the market in their area, i.e. by showing them the rate at which homes are being ‘absorbed’ or sold. This is accomplished by dividing the current number of listings in a given area by the average number of homes sold per month in the same area. The result is a ‘Total Month’s Supply’. The generally accepted rule is that a six month supply is considered a balanced market. Anything less than six months leans toward a ‘Seller’s Market’ and greater than six months is a ‘Buyer’s Market’. By definition, our entire region is experiencing a strong ‘Buyer’s Market.’
The Charlotte Regional Realtors Association’s monthly publication was released this week. The ‘Sales Trends’ section revealed data showing that our buyer’s market becomes more pronounced as price range increases. The first three columns below are directly from the Realtor publication and the fourth I calculated using April’s home sales as the ‘Absorption Rate’ (average number of home sales per month).
Price Range No. Closings No. Active Listings Months Supply
<120K 706 5582 7.9
120K-150K 356 3454 9.7
150K-190K 378 3928 10.4
190K-250K 331 4542 13.7
250K-350K 287 4816 16.8
350K-500K 178 3982 22.4
500K-1M 131 3482 26.6
1M+ 33 1189 36.0
The last column above shows the month’s supply in each category based on April sales as an average. It should not be difficult to see that as price range increases, the degree of the buyers market also dramatically increases. Additionally, the data shows that in April 84% of all homes sales were under $250,000 even though 43% of all listings had a price tag over that amount.
This also explains why all but one of my listings under $250,000 have sold and those over that price have not been so lucky. There are plenty of national and local economic factors that can explain what is happening, many of which I’ve discussed at length in previous blogs. But no matter how you slice it, higher priced real estate is going to be much harder to sell in the coming months. Pricing your home based on your competition will simply not work in this market.