Buyer Tips: December 2007 Archives
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.
That's right! Market History of the property and Days on Market or (DOM) are two great pieces of information to have to be able to negotiate a great deal as a buyer. Why's that?
Time is a lubricant that greases the seller's motivation to sell. When a property comes on the market the seller is full of expectations of a quick sale at full or near to full price. If the property is priced correctly it will happen. If it doesn't happen it's only with time and with feedback from the market does the seller realize that the market has rejected the initial offer. For the serious seller, s/he will adjust the price to better align their property with the market.
This is where the market history comes into play for the buyer. In MLSPIN, the multiple listing service for my area, they compile the market history for the listing of the property. Changes to the listing sheet such as going under agreement and then coming back on the market or price changes with the date of the change are noted in the market history of the listing. This info. is available to the agents only. So, if you are working with a buyer agent they should be sharing this information with you as part of their fiduciary duties.
When you look at the market history in conjunction with the DOM you get a good picture as to the motivation of the seller. For example, if the property has been on the market for 155 days and no price drops and no accepted offers in a declining market you will have a strong sense that the seller is not serious about selling and they are waiting for someone with "sucker" tattooed on their forehead.
Which reminds me of a story. I showed a multi-family to this couple one day. The husband had all kinds of artwork on his body which you could see when he wore shorts and a T-shirt. After looking at the property we were in the backyard discussing the property which needed a ton of work. It was in rough shape. This couple thought the property was way over priced. They were asking out loud how the seller could ask that kind of money for the property and without thinking I said, "They are looking for someone with sucker tattooed across their forehead." Upon which the wife said, "My husband has a lot of tattoos but that isn't one of them." We had a good laugh over that one.
On the other hand, if you see the property has been on the market for 155 days with no accepted offers and the seller has been lowering the price consistently over that 155 days then you get a strong sense that they are motivated to sell the property and should be more welcoming to your lower priced offer.
You, as the buyer, armed with this information with your buyer agent will be better able to read the motivation of the seller and therefore negotiate from a stronger position. Unless you have "sucker" tattooed across your forehead find out the Market History and Days on Market on a property before making an offer.
Time is a lubricant that greases the seller's motivation to sell. When a property comes on the market the seller is full of expectations of a quick sale at full or near to full price. If the property is priced correctly it will happen. If it doesn't happen it's only with time and with feedback from the market does the seller realize that the market has rejected the initial offer. For the serious seller, s/he will adjust the price to better align their property with the market.
This is where the market history comes into play for the buyer. In MLSPIN, the multiple listing service for my area, they compile the market history for the listing of the property. Changes to the listing sheet such as going under agreement and then coming back on the market or price changes with the date of the change are noted in the market history of the listing. This info. is available to the agents only. So, if you are working with a buyer agent they should be sharing this information with you as part of their fiduciary duties.
When you look at the market history in conjunction with the DOM you get a good picture as to the motivation of the seller. For example, if the property has been on the market for 155 days and no price drops and no accepted offers in a declining market you will have a strong sense that the seller is not serious about selling and they are waiting for someone with "sucker" tattooed on their forehead.
Which reminds me of a story. I showed a multi-family to this couple one day. The husband had all kinds of artwork on his body which you could see when he wore shorts and a T-shirt. After looking at the property we were in the backyard discussing the property which needed a ton of work. It was in rough shape. This couple thought the property was way over priced. They were asking out loud how the seller could ask that kind of money for the property and without thinking I said, "They are looking for someone with sucker tattooed across their forehead." Upon which the wife said, "My husband has a lot of tattoos but that isn't one of them." We had a good laugh over that one.
On the other hand, if you see the property has been on the market for 155 days with no accepted offers and the seller has been lowering the price consistently over that 155 days then you get a strong sense that they are motivated to sell the property and should be more welcoming to your lower priced offer.
You, as the buyer, armed with this information with your buyer agent will be better able to read the motivation of the seller and therefore negotiate from a stronger position. Unless you have "sucker" tattooed across your forehead find out the Market History and Days on Market on a property before making an offer.
