Published June 20, 2016
It’s a buyer’s market. No, it’s a seller’s market. Wait, it’s both! How’s that possible? It’s conceivable because the overall direction of a marketplace is a direct result of how its individual price ranges and neighborhoods are performing. The key to knowing whether a particular market, price range or neighborhood favors buyers, sellers or is balanced, is determined by the how long it would take to sellout the entire stock of homes if no new listings were added to the inventory. The “who-the-market-favors” measurement is determined by the absorption rate.
The rate and resulting month’s supply of inventory is determined by tallying the number of sales over a set period, say the past 3 months; dividing the sum by the number of months to determine the number of sales per month (SPM), then dividing the SPM into the number of homes for sale. For example, a total of 445 homes, townhomes and condominiums were sold through our local MLS during the 3-month period ending May 31, 2016. That’s a sales rate of 148 homes per month. Divide that number into our current inventory of 841 active listings, and the result is a 5.7 month’s supply of homes. A marketplace is said to be in-balance when the supply hovers around 6-months, according to Realtor.com. Below that mark, sellers begin to gain an advantage.
The real test is to determine the month’s supply for the particular neighborhood or price range in which you intend to buy or sell. In the Sonoma East and Sonoma West areas, where the average sales price over the past 3-months was $217,323, a total of 76 homes, or 25.3 per month, were sold, according to the Las Cruces Association of Realtors as of June 13th. When juxtaposed with the 134 homes currently for sale in the area, the result is a 5.2 month’s supply – indicating that sellers hold a bit of an advantage.
Las Cruces-area homes selling in the $100,000 to $200,000 price range enjoyed an average pace of 84 sales per month over the past 90-days. When compared to the 362 listings currently for sale, the supply dwindles to 4.3-months – giving sellers a noteworthy advantage. On the other side of the coin, the month’s supply for homes priced in the $250,000 to $350,000 range, in which 145 homes are currently for sale, is 8-months. Buyers have a slight advantage here.
In the $400,000 to $600,000 price range, where 9 sales took place over the past quarter-year and the current inventory of homes totals 79 active listings, the supply is a buyer-pleasing 26.3 months. Raise the price to $600,000 and above, where one sale was booked in the past 90-days and 37 homes remain, and the supply rises to a disheartening 112 months (that’s three and three-quarter years for those of you who don’t have a calculator handy).
Results vary in other price ranges and neighborhoods, such as the Las Colinas subdivision, 3.3-months; the Alameda area, 7.2-months; the Telshor area, 5.3-months; Picacho Hills, 8-months; and the Mesilla area, 26-months. The supply of homes priced below $120,000 is currently 3.2 months, while the inventory priced between $100,000 and $150,000 will last only 4-months at the current sales rate.
So what’s compressing the supply, particularly in the $250,000-ish and under price ranges? The same malady that’s been plaguing buyers around the country – a lack of inventory. As usual, we’re behind the curve but nevertheless catching up with the types shortages the rest of the country’s been wrestling with since last year. As we all learned in Econ 101, prices rise when demand exceeds supply. Given the number of buyers currently entering the bottom third of the marketplace and the corresponding lack of available inventory, it’s not surprising that prices in many neighborhoods are on the upswing.
See you at closing.