Absorbtion Rates for Richmond (i.e. how are houses selling?)

I am including the absorbtion rate numbers for the first half of 2009 (developed by Jackie Theil of Long and Foster Realtors) in this blog entry. These are important numbers to watch because they predict the strength of the market and whether we are in an environment of rising or falling prices.

We professionals use the absorbtion rate as the most important information in gauging the real estate market. It basically answers the questions; How are homes selling? and how long will it take the existing home inventory to sell off given the rate of sales over the past six months?

The resulting number is "Months of supply of home inventory". Six months supply is ideal. At that level the housing market is stable. A number lower than six months would indicate more demand than supply and home prices rise. The opposite is true with a number greater than six months supply indicating supply greater than demand and prices fall.

Here are the numbers for June 30, 2009 stratified by price range:

Sales price range: Absorbtion rate:
< $150,000 8.48 month(s) $150,000-$300,000 10.30 month(s) $300,001-$450,000 12.47 month(s) $450,001 - $600,000 17.85 month(s) > $600,000 26.36 month(s)

In looking at these numbers you can tell that homes in the lower prices ranges are selling much better than higher priced homes. We are seeing this as a result of more first time buyers entering the market and taking advantage of the $ 8000 first time buyer tax credit.

This is good news for home sellers that what to move up to a higher priced home because the first time buyers are buying their homes and in turn those higher priced home sellers that selling to them and on up the chain.

Although the numbers indicate a greater than six month supply of homes in all price ranges, this is a marked improvement over prior periods. Some parts of the country have rates as high as 25 to 30 months of inventory overall.

It is a relief to see the numbers improving. Note that the buyers market will not last, so get out there and buy a home while prices are still affordable, especially if you are a first time buyer. Remember the tax credit expires December 1, 2009 and it could take more that sixty days to close, so get a home under contract before the end of September or earlier!

Kerry@kerryriley.com
http://www.kerryriley.com/
Kerry Riley of Long and Foster Realtors
409 Strawberry Street, Richmond VA 2322o
(804) 432-2688