For most of the year there was a low inventory (i.e., supply) of Rumson homes on the market, but that’s changed in the past 4 months. At the end of June there were 11% more Rumson homes for sale than there were a year ago, and as of the end of September that number has grown to 24%. While fewer listings normally result in increased prices, more listings tend to push prices down as would-be buyers have more houses to choose from.
Of course the number of listings is only one of the four key objective real estate indicators we monitor on a monthly basis. The number of sales is an indicator of demand, and more sales tend to drive prices higher, whereas fewer sales typically predict lower future sales prices. For Rumson, single-family home sales have increased by 17% compared to last year, and that percentage has remained constant for the past 3 months.
The 3rd key indicator is price. To me, the median price is the best way to look at sales prices, but some REALTORS® use the average sales price instead. As of the end of September, the median Rumson home price was down 5%, but the average price was up 6%. To explain the apparent discrepancy, remember that the mathematical average is simply the total of all the selling prices divided by the number of homes that were sold, while the median is the price at which 50% of the homes sold for more money and 50% sold for less. The average can be higher than the median if more high-priced homes are sold.
Finally, the 4th indicator is the real estate absorption rate. This is a calculation of how long it would take to sell all the houses that are currently listed for sale, assuming that homes continue to sell at the same rate as they have during the past 12 months. The absorption rate is important because it takes into account both demand (#1 above) and supply (#2 above). If you remember my previous posts you know that REALTORS® consider an absorption rate of between 5 and 7 months to be a “normal market”, whereas more than 7 months is a “buyer’s market” and less than 5 months is a “seller’s market”. A year ago the Rumson absorption rate was 9.4 months (a “buyer’s market”) and now it’s 6.2 months (a “normal market”).
Here are Rumson’s September year-to-date numbers in a table:
Sales: 77 in 2012, 90 in 2013 (+17%)
Listings: 66 in 2012, 82 at the end of September 2013 (+24%)
Median Sales Price: $1,195,000 in 2012, $1,137,500 in 2013 (-5%)
Average Sales Price: $1,220,647 in 2012, $1,290,980 in 2013 (+6%)
Absorption Rate: 9.4 months in 2012, 6.2 months now (much stronger Demand vs. Supply)
Real estate is fairly quiet from November until February, with fewer homes on the market and fewer buyers actively looking. However, serious buyers and sellers tend to be more motivated during this time of the year, so don’t assume that the market’s not worth while at this time. Remember, a sale takes place when an informed seller and an informed buyer agree on a price. I’ll keep giving you monthly updates on Rumson real estate.
Note: I wrote this article; these are my personal views and do not necessarily reflect the views of Diane Turton, Realtors.
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