How's the market???? 3-25-08

One of the questions I am most frequently asked is: “How’s the market?” When analyzing the real estate market, Absorption Rate is a great tool for quantifying market activity. The absorption rate is the number of houses in a certain price range divided by the average number of closed transactions each month in that price range over the past year. Simply stated, it calculates for you of the number of months needed to sell the existing homes.

With this information we can determine the relative strength or weakness of each range based on historical averages. Our average absorption rate in the Chico market is 4-6 months. Any rate less than this is, ie. 3.3, indicates a stronger or more active market than “normal.” Any number more than the average means a weaker or less active market than the historical norm.

The chart below shows absorption rate by price right now. Note that Chico is performing well with an absorption rate consistent with a normal market.











The $200-300k price segment is extremely active. Why? In this segment, the principle, interest, taxes and insurance (PITI) combined with the tax benefits of owning a home calculate as a less expensive option to renting.

If you have been sitting on the fence, your wait is over. Now is a good time to buy and sell. We're looking at an historical moment right now with phenomenally good prices and interest rates. If you are interested in buying your next home or know of someone who is thinking about their dream home, please contact me.

Until next month, your very full time Realtor,
Matt
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Matthew Herman
Keller Williams Realty
530-518-0974 (Office)
530-230-2708 (Fax)
530-518-0974 (Cell)
matt@MatthewHerman.com

Don’t forget to check out all of my listings at http://www.matthewherman.com/ or for neighborhood information go to http://www.chiconeighborhoods.com/.