This question just came into the Ask the Broker in-box. We get it all the time”¦
How fast can you sell my house? 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 release costs 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, finding out what the home warranty cost is and 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 that Building broker in Perth use 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.
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Good stuff Jay.
People often don't think of all of the things that can go along with a home sale. It's a complex process, especially in today's markets. We usually try to stay around a 4-5 month inventory and we're seeing 6 to 11. Could be worse, but that's the MidWest! 🙂
That's certainly a loaded question. My most succinct answer to this question would be that it depends on pricing. If priced aggressively, the saddest-looking shack in the worst neighborhood will sell quickly, whereas a beachfront mansion could sit on the market for years if priced outside of reason and market values. Good stuff, Jay.
Thanks Josh and Alex. Hopefully the chart was displaying when you visited. It was missing in action when I checked. It's back now (hopefully).
Jay – it's working great. I tweeted this – great stuff.
My recent post Darel Daik with Noble Mortgage and Historically Low Interest Rates
Trifurcation- my first time! Thanks for the information!
Really interesting graph ! It seems normally to have this king of result but it's better to confirm that.
Of course there is less people who can afford a $3M house than a $250K
Thanks a lot ! I will follow your blog from this day
Love the graph. It is a great representation of the dichotomy in the market (I just had to throw my own big word in to match trifurcation). Even in the highest end of the luxury market, everyone is looking for a deal these days. Price is the most important factor to my clients. If you want to sell fast, you have to price it aggressively.
My recent post Desert Mountain Club Turnover Update – Exciting Progress Has Been Made
Exactly, people are trying to get an idea of an estimated or average length of time that homes in their area are selling and HOPING you'll say that theirs will sell faster, and, of course, at an above average price. I like any kind of informational/explanatory grid/chart, even something as simple as a mailer — like the one I received the other day from an agent, which displays a grid with all the homes that she has sold in the area in the last 2 mos (address, yr blt, sq ft, DOM, List pr and sale pr). I thought it was pretty cool, local and relevant and sure made her look like she knew what she was doing!
Hey Jay, I think you answered that question perfectly. It's hard to give an exact answer as to how long it will take because at the end of the day, it really is up to the market to decide.
My recent post California Foreclosure Timeline
Ummm, as a consumer, all this data can get lost if not presented well by a Realtor. Hopefully some agents out there are listening and can pass this kind of info to the sellers.
Very informative. Now i know how to address the same types of questions i get from sellers. Thanks!
Awesome! A very well-written, data-driven article! Even the markets here in the Minneapolis area are trifurcated. In-fact, when presenting data to our sellers during listing appointments, all of us realtors should be using data driven recommendations like shown in this article. Great job!!
A comment in this post that really hit home is about the media stressing the bad. Even in our small market in Portland, ME the angle always seems to be how to find the lump of coal somewhere in the numbers.
Jay,
Really great answer to your client. Even I could understand…. everything but "trifurcation". The DOM comments are appropriate by your readers. Basically (at least in my area) really well presented properties that are well priced will sell quickly. There are SO many variables that the only way to do justice is for you to meet with this prospect. Hope that happens for both party's benefit. Good post.
In our area I could have it sold TODAY at the right price. It is typical for bank owned homes to go under contract during the first week on the market, but most "regular" sellers are not willing to drop to that price!
My recent post The Greenwoods Condos in Walnut Creek CA
This chart is a great tool to illustrate some of the most important variables influencing days on market. Most customers today have access to so much data, however they have no idea how to interpret the information. The media, as you pointed out, is not doing a very good job at showing the whole picture. It is often and uphill battle trying to educate our clients about the what they THINK they already know!
Great chart! This is always a tough question to answer for sellers. When I put my personal home up for sale I figured it would take 4 to 5 months so I started a bit early to make sure it was sold by the time my new house was completed. Once listed, my house sold in 14 days so now I'm in a rental short term. Just goes to show you that market time is tough to predict.
a realtor need to present all the data to the consumer.
hopefully some agents are here listening to it and will pass info to the seller.
Due to economical crisis today we need to know how to sell homes to be able to sell in the right price. thanks for sharing this post!
Very good technical article! This can help set the sellers expectations appropriately.
Ian is right…It is often and uphill battle trying to educate our clients about the what they THINK they already know. We are seeing that in Raleigh and it is really becoming an issue.
You have provided very technical questions.
It is typical for bank owned homes to go under contract during the first week on the market, but most "regular" sellers are not willing to drop to that price!
It seems to be a great deal ! Thanks for the useful information.I will definitely check it out.