If you’ve been following my posts you know that there are four (4) key, objective indicators for real estate: number of sales (demand), number of listings (supply), price and absorption rate.
Let’s start with the number of sales. At the end of the 3rd quarter, Fair Haven home sales increased by 13% compared to last year. The number of sales is an indicator of demand: more sales tend to drive prices higher, whereas fewer sales typically predict lower future sales prices.
Next is the number of listings. Fair Haven has had a low inventory (i.e., supply) of homes on the market for every month this year. As of the end of September there were 21% fewer listings than a year ago. Fewer listings normally result in increased prices, while more listings tend to push prices down as would-be buyers have more houses to choose from.
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 Fair Haven home price was very close to what it was a year ago, but the average price was up 11%. 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 Fair Haven absorption rate was 5.9 months (a “normal market”) and now it’s 3.4 months (a “seller’s market”). The absorption rate has been less than 5 months all year, so it’s surprising that the median price hasn’t increased.
Here are Fair Haven’s September year-to-date numbers in a table:
Sales: 69 in 2012, 78 in 2013 (+13%)
Listings: 33 in 2012, 26 at the end of September 2013 (-24%)
Median Sales Price: $662,000 in 2012, $660,000 in 2013 (-0%)
Average Sales Price: $682,787 in 2012, $759,463 in 2013 (+11%)
Absorption Rate: 5.9 months in 2012, 3.4 months now (much stronger Demand vs. Supply)
The bottom line is that 3 of the 4 objective indicators are predicting higher prices in the near future; only one (median price) is neutral.
If you’re thinking of buying a house in Fair Haven and find something you like, remember my advice: DON’T CALL THE LISTING AGENT (even if it’s me)! The Listing Agent works for the Seller, and has a fiduciary responsibility to negotiate the highest price. Instead, get a REALTOR® who will work only for you (i.e., a Buyer’s Agent) and who will negotiate the lowest price.
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 Fair haven 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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