Last week I reviewed 4 key objective indicators for the 2016 Fair Haven real estate market, and today I’ll do the same for Rumson. Indicator #1 is the number of home sales, and this is an indication of Demand. 26% more homes sold in Rumson in 2016 vs. 2015, and if you’re thinking of buying a home in Rumson, this isn’t good news. It isn’t good news because increased demand normally results in higher prices.
The second indicator – the number of listings – indicates Supply. 17% more homes were listed in Rumson in 2016, an increase of 17% over 2015. Increased supply normally results in lower prices, so that’s good news for home buyers. There are various ways to indicate the number of homes listed. I use the 12 month average, but some Realtors like to use the listings for one month compared to the number of listings in that same month in the previous year.
The 3rd indicator is the Real Estate Absorption Rate, and it’s important because it takes into account both Supply and Demand. The absorption rate calculates how long it would take to sell all the homes on the market, assuming that home sales continue at the present rate. There are different ways of calculating this number: some people use the current month compared to the same month a year ago; others use the past 6 months compared to the same period last year; I, like many Realtors, use the past 12 months. The 2016 Real Estate Absorption Rate was 8.7 months, indicating it would take 8.7 months to sell ALL the Rumson homes on the market in a typical month, assuming homes sold at the rate they did in all of 2016.
In a “normal” real estate market, the Real Estate Absorption Rate is between 5 and 7 months. When the absorption rate falls below 5 months we’re in a “seller’s market”, indicating that Demand is exceeding Supply; when it rises above 7 months we’re in a “buyer’s market”, indicating that Supply is exceeding Demand. At 8.7 months, Rumson’s 2016 absorption rate was consistent with a “buyer’s market”. In fact, this indicator says 2016 was more of a “buyer’s” market than 2015, when the absorption rate was 7.6 (also above the 5 – 7 month rate for a “normal market”). So the absorption rate is the “tie breaker” between indicator #1 (which was good news for buyers) and indicator #2 (which was bad news for buyers. A higher real estate absorption rate is good news for buyers.
The final indicator is the median sales price. As I said last week, this isn’t the average sales price; the average is calculated by adding all the selling prices and dividing by the number of homes sold. The average price can be misleading, because it can be distorted by homes that have sold at either very high or very low prices. The median sales price is the price at which 50% of the homes sold for a higher value and 50% sold for a lower value. The median sales price for a home in Rumson fell slightly, from $1,200,000 in 2015 to $1,175,000 in 2016. A lower sales price is obviously good news for home buyers. While Fair Haven home prices rose in 2016, Rumson home prices did not. The Rumson median price is substantially higher than Fair Haven’s, and it’s another indication that the local 2016 real estate market was stronger for lower-priced homes than for higher-priced ones.
Here are the numbers in tabular form; positive news for home buyers is highlighted in underlined italic font but as was the case last month, this month’s statistics don’t have any good news for buyers:
Rumson Single-Family Home Sales, January 1 – December 31
2015 2016 Comment
Sales 107 135 26% more home sales.
Listings/Month* 78 91 7% more home listings.
Months Supply* 7.6 8.7 Weaker demand vs. supply.
Median Sale $ $1,200,000 $1,175,000 2% lower median sales price.
*based on the previous 12 months of listings
The bottom line: if you’re thinking of buying a home in Rumson, 3 of the indicators are good news, and 1 is bad news. Now is a good time to buy in Rumson.
Leonard “Len” Dunikoski, GRI
Diane Turton Realtors – Rumson Office
8 West River Road
Rumson, NJ 07760
(732) 239-0739 (cell) (732) 530-6686 (office)