Guess What!? It’s a Seller’s Market…
You may have heard the terms “Seller’s Market” and “Buyers Market.” Over the past few years, we’ve heard the term “Buyer’s Market” far more than we have the other. These terms are basically how we describe who has more power to control the price of the home. It’s simple supply and demand.
When it’s a Buyer’s Market, the buyer has more control because there are more homes, or a surplus of homes on the market. It usually results in homes dropping in price to meet the buyer’s expectations.
When we’re in a Seller’s market, it means that the supply has been reduced and there are more buyers than there are homes for sale. When this happens, homes tend to sell faster, and buyers tend to find themselves competing for properties.
Absorption rate plays a huge role in the type of market we’re in. Absorption rate is calculated by dividing the number of homes sold in the past 30 days into the number of homes on the market. When the absorption rate falls between 3 and 6 months, the market is fairly balanced between buyers and sellers. If this number goes over 6, we’ll find ourselves in a buyer’s market, and when it’s below 3, a seller’s market.
Today is May 9th, 2011. In the past 30 days, 7,600 single family detached homes have been sold as evidenced by the Arizona MLS data. There are currently 20,970 on the market. So, today the absorption rate is roughly 2.75 months.
In other words, it’s a Seller’s Market.