This question just came into the Ask the Broker in-box. We get it all the time”¦
How fast can you sell my home? Are we in a buyers or sellers market?
Well, it depends.
Depends on what?
A myriad of things. . .
- Where is the home located?
- Will this be a short sale, or a “traditional” sale? (Short sale meaning you owe more than the home can be sold for. Traditional meaning you have enough equity to satisfy the loan, and your closing costs).
- What is the condition of the home?
- How aggressive are you willing to price it?
- What are comparable homes selling for?
- Are you willing to provide any buyer concessions (paying their closing costs, buying a warranty, pre-paying HOA dues ”“ there are many things a seller can do to “sweeten” the deal and appeal to more buyers).
- And more. . .
There is no single answer to how fast a home can sell, or whether we are in a buyers or sellers market. One good market statistic to examine when you are looking at (roughly) how long it may take to sell your home is absorption rate ”“ which will tell you how long it takes on average to sell a home. The formula is pretty simple:
Find the number of homes currently listed for sale and divide that by the number of homes sold last month. The result is the number of months it would take to reduce that inventory to zero.
For example: Let’s say there were 100 homes listed for sale, and 25 homes were sold last month. The absorption rate in this example is 4 months (100 divided by 25 = 4). Assuming no other homes were listed, and sales rate stays flat) it would take 4 months to sell 100 homes.
The astute reader may be saying, “but more homes will be listed and the sales rate probably isn’t flat across all that time.”
True statements. But the calculation does give a basic idea of how many months of inventory is on the market at any given time.
Right now the Phoenix real estate market absorption rate is basically trifurcated (isn’t that a cool word?). There are three distinct absorption rates that can be seen when you look at different price ranges. And you should look at price ranges ”“ don’t just lump the entire Phoenix metro area together. Here’s a nifty chart showing absorption rate by price range for the Phoenix real estate market:
Where’s the aforementioned trifurcation?
Generally speaking, about six months of inventory is considered a “neutral market”, less than six months a seller’s market and greater than six months is a buyer’s market.
Gaze longingly at the chart above and you’ll see that homes listed for less than $50K are selling quickly. Very quickly. That makes it a seller’s market. Homes priced between $50K and $500K are in the six month neutral market range, and homes priced above $500K have anywhere from a one year to six year absorption rate.
Keep in mind these price ranges all have hundreds to thousands of homes in them and just because you may be selling a home in the $175 – $200K price range it doesn’t necessarily mean it will take six months to sell your home. Some homes in that price range sell in days, some may never sell. On average though, you’re looking at around six months. Selling a higher end home? Expect it to take significantly longer.
As always, take real estate market stats with a grain of salt. The mainstream media likes to hype up the bad numbers (and ignore the good) and a metro area the size of Phoenix shouldn’t ever be all lumped in under one number. You’ve got to consider real estate stats in smaller chunks. As seen above, the “months supply of inventory” varies wildly by price range. I can assure you that other metrics also vary wildly across the Phoenix metro area as well.