You have heard me talk before about an Absorption Rate in the Real Estate Market. Just to recap, the Absorption Rate in a Real Estate market is the number of months it will take for an area to sell all of the inventory in a particular price point, based on how many homes they sold in the past month in that same price point and assuming no other homes come on the market in that price point. A healthy market in any price point in a 6 month inventory. If the inventory is higher than 6 months, the market is swinging towards the buyer’s benefits, and if the inventory is less than 6 months, the pendulum is swinging towards a sellers market.
Since our Real Estate market here in Asheville has been correcting itself very quickly since January 2013, homes below $200,ooo have been swinging towards the sellers side of the pendulum for quite a while. But from the bar graph to the left, you can see that in February, the higher end homes were still very much of a buyers market. Now, from this bar graph above, we are still seeing that the inventory of homes above $900,000 are still quite numerous and this is for many reasons. First of all, there are fewer buyers in this price point. Secondly, lending in this price point is very risky and banks are much more particular about whom they lend to in this price point.
But, what I want to compare closely is the $400,000 to $600,000 range. This is where the “trickle up” process is taking place. As the inventory becomes less in the $200,000 to $250,000 range, the buyers are not finding what they are looking for. Therefore, they begin inching up their price point to the $250,000 to $300,000 range. Then as that price point becomes saturated with buyers and the inventory becomes lower, it inches up to the next tier and so on.
What does this mean to you? Well, if you are selling your home, and you are in a price point that the inventory is saturated, you are going to be able to sell HIGH and get top dollar for your home. THEN, if you are moving UP to are higher price point for the home you are buying, you are going to hopefully be in a price point that still has many homes on the market, and be able to buy LOW in a higher price point. SO, you are in the best scenario in any market, when you sell HIGH and buy LOW.
The caution here, and this is what the graphs above are showing you as well, is that here in the Asheville (Buncombe County) Real Estate market, we are quickly trickling up where even our higher end homes are moving back to a sellers market and inventory becoming depleted in this area as well.
There are many factors that are contributing to this wonderful season in real estate that we are experiencing right now:
1 – Interest rates are creeping up and buyers are feeling a sense of urgency. We were telling buyers last summer that this low interest rates were not going to last, but I think many of them didn’t believe us. Instead of listening to their Realtor, they were listening to the media (which we know is always divine knowledge from God) and so they said “well, we are going to just wait alittle long and see if the prices go down anymore. Then BOOM! The prices started creeping up, the interest rates starting inching up (today, 6/19/13 interest rate is 4.1%, last June the interest rate hovered around 2.75%)and the buyer missed the “bottom”. BUT it was a wake up call and the buyers did start making offers.
2 – Inventory is low nationally and people want what they can’t have. It is like a sale going on and there are only so many boxes on the shelf.
3 – Economy is picking up and there is more of a sense of security among buyers that it is now “safe” to invest in real estate.
4 – Because of the distressed homes that have hit our country in the last 5 years, there are more people out there that can no longer purchase a home because of their financial history therefore they are renting and there are not enough rentals out there. So, rentals are becoming big business, landlords are getting more for the rental this year than they got two years ago and with rent going up, depending on the area you live in, it is cheaper to buy than to rent.
I am sure there are many, many more reasons why the market is moving so well, but this is enough for my weary brain right now. But be warned – we are already hearing that this perfect season is not going to last. Economists a/k/a fortune tellers are already saying that the market is appreciating too quickly again and we are in for another recession in the Fall 2013. Is this true? Who knows. All we know is that the sun is shining, it is in the mid 80’s with no humidity on most days in the mountains and we are loving it!
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