Has the residential real estate market hit bottom? How will we know when it has?
This question was asked on Linkedin.com and this was my response:
Real estate is local so some areas have hit bottom and many areas have not.
A good indicator is when the days on market start declining and the absorption rate is six to seven months or less.
The absorption rate is derived by dividing the active properties on the market by the number of homes that have sold in the last 12 months so if no new homes come on the market the inventory would sell in x number of months.
In my town of Foxboro, MA at the height of the market the absorbtion rate for single family homes was 2 to 3 months. It went up to around 8 to 9 months and now this morning, Nov. 25, 2007 it is at around 6.5 months. I'd say my home town is getting near the bottom or is close to the bottom.
The days on market for the first six months of 2007 in Foxboro were 164.12 days and the second half of the year so far the days on market is 144.44 days.
The stats came from my local MLS.
If you want to really get into this you could look at different price points and see if the lower end is doing better than the higher end or vice a versa.
Real estate is local so some areas have hit bottom and many areas have not.
A good indicator is when the days on market start declining and the absorption rate is six to seven months or less.
The absorption rate is derived by dividing the active properties on the market by the number of homes that have sold in the last 12 months so if no new homes come on the market the inventory would sell in x number of months.
In my town of Foxboro, MA at the height of the market the absorbtion rate for single family homes was 2 to 3 months. It went up to around 8 to 9 months and now this morning, Nov. 25, 2007 it is at around 6.5 months. I'd say my home town is getting near the bottom or is close to the bottom.
The days on market for the first six months of 2007 in Foxboro were 164.12 days and the second half of the year so far the days on market is 144.44 days.
The stats came from my local MLS.
If you want to really get into this you could look at different price points and see if the lower end is doing better than the higher end or vice a versa.
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