Steady, Steady… A Market Update

Absorption Rates for November 2008

[singlepic=190,320,240,,right]Good news, Fayetteville home sellers and buyers, the latest numbers for home sales over the last 12 months are available from the Fayetteville Regional Association of Realtors® and they paint a picture of a market that appears to be steady, and performing at a seemingly constant absorption rate.  That’s great news for all, but be cautious, it is also no predictor of what may happen in the future.  Let me explain:

What is an absorption rate and why do I care?

In my page about the local market, I explain that the absorption rate is a number that reflects how many months it will take to sell all the houses currently on the market–basically, how fast the market can absorb the inventory.  Experts agree that if it takes 5 – 7 months to sell a house, that can be considered a balanced market.  Shorter than that is considered a sellers market and longer than 6 months is generally understood to be a buyers market (of course, these are general terms–don’t get too wrapped up about the exact number of months.)  The chart below shows the latest numbers, and they vary only slightly from last month’s numbers.

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So, just looking thru the data, houses listed for sale for less than $150,000 are still selling in under 6 months time.  That accounts for over 50% of the houses currently on the market.  Note, also, that houses listed for sale over $225,000 are taking over a year to be absorbed.

Now, here are the factors to consider about what all this means to you:

  • Home Sellers – houses do not sell in the order in which they come on the market.  A fairly priced house that is in great condition and in a good location will sell much more quickly than the absorption rate implies;
  • Home Buyers – the market is not terrible, but there are plenty of really great houses available and sellers may be willing to negotiate more;
  • Investors – Fayetteville is a great market with a lot of affordable homes that still offers outstanding potential to build wealth through real estate.

Lastly, remember that absorption rates are a lagging indicator of the market.  The numbers are based on how quickly homes have sold over the past 12 months.  They don’t offer a prediction of what will happen in the future.  The future of the local market is controlled by population growth and economic/job growth.  These factors bode well for the Fayetteville market, which is tied very closely to Fort Bragg, and is expecting an substantial increase of higher level military and civilian postions as military bases are realigned under federal law (Base Closure and Realignment Commission – BRAC.)