In continuing the absorption rate discussion from a previous post, I would like to narrow the previous example to a segment of the local market and demonstrate how even within a moderately sized market segment there are actually several mini markets with widely different supply and demand characteristics.
The North Alabama market segment illustrated in the following table is Madison city limits segregated further by price. Note the wide variety of market conditions across the various price ranges. In this localized market example we see upward price pressure in the low end, flattening to downward price pressure in the middle, and some strong downward price pressure in upper end homes. Note the almost 2 yr supply of homes above $550k compared to the 3 month supply of starter homes.
| Madison Feb-2008 Market Snapshot | ||||
|---|---|---|---|---|
| Price Range |
Demand Per Month |
Current Inventory |
Months of Supply |
Market Type |
| $0 - $100K | 5.66 | 6 | 1.06 | Seller |
| $100k - $150K | 10.75 | 31 | 2.9 | Seller |
| $150k - $175K | 8.42 | 48 | 5.7 | Balanced |
| $175k - $225K | 15.08 | 125 | 8.29 | Buyer |
| $225k - $275K | 12.25 | 77 | 6.29 | Balanced |
| $275k - $325K | 10 | 70 | 7 | Transitional |
| $325k - $375K | 5.83 | 39 | 6.68 | Transitional |
| $375k - $450K | 5.5 | 62 | 11.27 | Buyer |
| $450k - $550K | 4.08 | 34 | 8.32 | Buyer |
| $550k - $1200K | 2.58 | 59 | 22.84 | Buyer |
When segregating this further into neighborhood or neighborhood-groups the absorption rate of the mini markets can be invaluable in assisting a potential seller in pricing their home as well as helping an agent set the proper expectation.
For a buyer it is always nice to know when the pricing pressure of the locale is on their side.If you are currently investigating purchasing or listing a home and not already working with a Realtor don’t hesitate to contact us for a no obligation detailed look at some of your favorite neighborhoods.
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