November was a slow month for Rumson real estate. Nine (9) Rumson homes sold in November this year compared to the 14 that sold last year. In addition, our year-to-date statistics still show 3 of the 4 key real estate indicators looking favorable for home buyers (fewer homes were sold, there are more listings, and the real estate absorption rate (months’ supply) is longer. The big negative indicator is that the median home price is up 6%:
Rumson Single-Family Home Sales, January 1 – November 30
2013 2014 Comment
Sales 114 98 14% fewer homes sold.
Listings 73 76 4% more homes on market.
Months’ Supply 6.1 7.9 Weaker demand vs. supply.
Median Sale $1,100,000 $1.170,000 6% higher median price.
Why are the numbers in red font bad for Rumson home buyers? Fewer sales indicate lower demand, and lower demand tends to push prices down. More listings indicate greater supply, and greater supply also tends to push prices down. The real estate absorption rate (months’ supply) takes into account both supply and demand. It’s a calculation of how long it would take to sell ALL the homes on the market, assuming that homes continue to sell at the same rate they did in the past 12 months.
There are different ways to calculate the absorption rate. I use the average number of sales for the past 12 months and the average number of listings for the same period. An absorption rate of 5 – 7 months is considered to be a “normal market”; a rate less than 5 months is considered a “seller’s market”; and a rate greater than 7 months is considered a “buyer’s market”. So we have a paradox: the absorption rate says we’ve gone from a “normal market” last year to a “buyer’s market” now, and yet the median price is up 6%.
3 of the 4 key indicators are predicting lower Rumson home prices in the near future, so if you’re thinking of buying, 2015 might be a good year for you to make your move. If you’ll need a mortgage to finance your purchase, just keep an eye on mortgage rates. The “experts” are predicting several more months of stable rates, and then a significant rate increase in the 2nd half of 2015.
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