As consumers enter the home buying and selling process, they quickly take note of the local inventory, or how many homes are on the market. However, in the midst of various national news stories on how the real estate market has fluctuated in recent times, it can be difficult to understand the current state of each local market. If you've been watching home sale prices either because you have considered selling or are looking to buy, it's probably no surprise that we're dealing with a competitive market. A little lesson on absorption rate will help to make sense of some of this madness. I have outlined a few key points regarding home inventory.
Absorption Rate: The rate at which available homes are sold in a specific real estate market during a given time period. Absorption rate is calculated by dividing the number of homes listed for sale by the number of homes sold per month.
Because the National Association of Realtors® reports a balanced market to be a six month supply of inventory, most professionals who use absorption rate also use six months of home sales to establish this figure. For this exercise, we’ll break this down over the last 6 months, as well as Year-To-Date for a better understanding of current trends.
Real estate tends to slow down a bit during the winter months while homeowners and potential sellers are busy with holiday travel, visiting family, nasty weather and that overall tendency to hibernate. The spring market here in Greater Boston started ramping up in early February, though, after home buyers have been "salivating" for new properties to pop up during this period of no/low inventory. This waiting game intensifies the competition across the board leaving the same pool of buyers all vying for the same property, and it’s not going to slow down any time soon.
As of March 8, Watertown had 21 properties listed on MLS in market inventory (YTD) which is just over a month’s supply. Meaning, based on trend, it would take that amount of time to sell through all homes that are for sale right now.
We can break this down even further by looking at specific property types:
These averages will continue to change a bit as we see more home sales throughout the year, yet what we can read from this data is that your chances of owning a Condo in Watertown are greater than your chances of owning a Single Family Home. When comparing listing units, Condos account for the majority of home sales in Watertown.
As we continue to look at YTD averages, we can see that the approximate months supply of inventory substantially decreases in the case of Single Family Homes and even more so with Multi Family Homes:
Inventory Sold Over The Last Six Months:
77 Condominiums (an average sold of 13 per month)
46 Single Family Homes (an average sold of 7 per month)
28 Multi Family Homes (an average of 5 sold per month)
These low numbers reiterate the strong local property demand that we’ve been seeing. We are bucking the national trend as we’re in what’s referred to as a ‘seller’s market’ in and around Watertown. There are more buyers than homes for sale, and this demand gives sellers an advantage to obtain higher prices for their home. While a homeowner enlists the help of a real estate brokerage to assist in selling a property, a home buyer is entitled to the same representation while buying.