July, 2009
I ran some statistical data this morning to ascertain the position of the Fredericksburg real estate market. As I have mentioned several other times over the years on this blog, a balanced market is one that has an absorption rate of about 6 months. Meaning, if you take the number of actively listing properties plus those under contract, and divide it by the number of properties sold in the last 30 days, and have around 6 months of inventory the market is fairly balanced.
If we do that with our market the numbers look something like this:
- Fredericksburg City/Stafford/Spotsylvania (all grouped as one) = 6.3 months
- King George = 14 months
- Orange = 14.8 months
- Caroline = 9.1 months
In most cases this would represent a good picture of the health of the market. It would show the core area of Fredericksburg City, Stafford and Spotsylvania as perfectly healthy. King George and Orange would then have about 8 months too much inventory, and Caroline would have about 3 months too much inventory. However, in the current Fredericksburg real estate market, this is an inaccurate picture.
The statistical data is far skewed because of the HUGE presence of short sales. You see short sales take far longer to close than a normal sale. So, a scale that is based on sales that occur in the last 30 days (the typical time to close a transaction) doesn’t reflect what is truly happening in the market.
Working with a lot of buyers, my team realizes that the TRUE available inventory is far less than what is considered a balanced market. So, I ran the numbers to see what is AVAILABLE to buy. That means I took active properties, and divided it by the homes that are currently under some form of contract and that have sold in the last 30 days. That shows us the true available inventory. Those numbers are listed below and are vastly different than the ones above. Again, this is because of the long contract period for the short sales.
- Fredericksburg City/Spotsylvania/Stafford = 1 month
- King George = 3.3 months
- Orange = 3 months
- Caroline = 1.7 months
This data shows why it is difficult for a buyer to buy a home right now. The inventory is down, and there are a LOT of people who are trying to take advantage of the $8,000 tax credit and low prices. So, buyers need to be quite aggressive to be successful.
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