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Will My Home Sell In Today’s Market?

 

will-my-home-sell-in-todays-marketThere are many factors to consider in today’s real estate market if you’re thinking of putting your home up for sale.  A question often asked is “Will My Home Sell in Today’s Market?”

Seeing that your home is probably your largest asset selling it is probably one of the most important decisions you will make in your life.

Price, location, condition are three of primary components in the sale of a home, however there are other things to take into consideration as well.

Why Are You Moving?

Your reason and motivation to sell is the deciding factor as to how you will approach the home selling process.

It influences every aspect of the process from what you determine as your asking price at to how much you’re willing to invest in order to prepare your home for sale in the form of time, effort and money.  

For instance, if your objective is for a quick sale, this would dictate one approach. If you’re looking to maximize your profit, the sales process may take longer therefore requiring another course of action.

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What’s the Absorption Rate?

Absorption rate is the rate at which homes sell in an area.

The definition of the absorption rate is the rate at which available homes are selling in a specific area in a specific time period.

It is calculated by dividing the total number of active homes on the market by the average number of sold homes per month.

Absorption Rate Analysis

6 months – Balanced market
Under 6 months – Seller’s market
Over 6 months – Buyer’s market

Here’s how I calculate the absorption rate using New Haven as an example based on September 30, 2016 single family residential homes data provided by CTMLS

The Data

  • Time Frame = 12 months (total months from October 1, 2015 to September 30, 2016)
  • Number of Sold Homes = 347 (from October 1, 2015 to September 30, 2016)
  •  Number of Active Homes = 121 (at the end of September 30, 2016)

Calculations

  • Rate of Home Sales = 28.9 –  29 homes are sold every month.  This number is found by taking 347 divided by 12 (Number of Sold Homes/Time Frame)
  • Absorption Rate = 4.17.Months. Found by taking 121 divided by 28.9  (Number of Active Homes/Rate of Home Sales)

What does this mean?

At the current rate if there is no change in market conditions and if no new listings come on the market it will take 4.17 months for the current inventory to sell. The absorption rate for a balanced market is typically around 6 months.  Knowing whether the market is more balanced or trending towards a seller’s or a buyer’s market is an important piece of information to know in order to strategically price your home based on the current supply and demand. 

What is DOM?

DOM is an abbreviation for Days On Market a real estate term that represents the length of time a home for sale has been active on the market before one of two thing happens; either an offer is accepted or the listing agreement between the seller and the real estate broker ends.

It’s important to note that typically properties with a longer DOM will require a reduction in price than listings with a shorter DOM due to the perception that the property could be overpriced or may be less desirable. 

This number can sometimes be reset if a listing is withdrawn or expires and comes back on the market again as a new listing.  Your real estate agent should have the ability to research the listing history of a property and can provide a more adequate picture of how long a property has been on the market.

Knowing the average DOM can give you a fairly good indication of how long it will take for your home to sell.