LEARN AN EASY WAY TO TELL IF THE MARKET IS CHANGING

Dear Readers, 

If your a homebuyer in this current market, you might be hearing that the market is slowing down right now. You might be thinking things will be different for me. Friends, family and co-workers may be telling you there is a shift happening and prices should be going down. 

I'm here to tell you there is a simple and easy way to truly understand this market, it's called absorption rate. Take a look at the image below. You will see 3 columns each depicting a different market based on months of inventory (homes for sale).

To discuss this further, the image above depicts 3 different markets. Each market is determined by the number of months a home sits on the market waiting to be sold. This number also tells us if home values can expect to appreciate or depreciate. 

• 0-6 months of inventory is a sellers' market and we can expect continued appreciation because inventory is low and buyer demand is high.

• 6-7 months of inventory is a Neutral/balanced market and home prices will only appreciate with inflation.

• 7 or more months is a buyers' market and home prices will depreciate because there are more sellers than buyers and homes are sitting on the market longer.

Let's go over a few examples to solidify your understanding of this simple concept that you can share with everyone, including your realtor, if they have not informed you already in the market you are looking to buy. 

In one of the main Los Angeles zip codes 90011, inventory is turning over at 1.8 months. This means if a home goes on market today the soonest it will sell, or get absorbed by a buyer, is on average 1.8 months. This is anywhere from 1 day to 71 days, specifically in this zip code. Keep in mind Los Angeles is a unique market and this number changes from neighborhood to neighborhood.

For example, let's take a look at the Highland Park market. During the pandemic many home buyers flooded to the North East LA region in hopes to find less competition amongst buyers. Highland Park saw historic price appreciation over a short period of time. 

Currently the absorption rate in Highland Park is 2 months ranging from 0-159 days based on the number of homes active on market and homes sold over the past 6 months. 

What is important for you to consider is what the data show regarding how long homes are sitting on the market within a specific period of time. 

If homes are sitting on the market less than 6 months, then we are in a sellers market and can expect home prices to continue to appreciate, it's really that simple.

So if I were to ask you what type of market we are in and what we can expect, your response would be; Sarah we are in a sellers market, because homes are being sold quickly, less than 2 months on market and we can expect continued appreciation because buyer demand is high and invetory is low. 

To learn more about the market, the buying and selling process, reach out, we are here to help 😊