In Real Estate, statistics are examined monthly, yearly, even daily, in order to determine overall trends and general health of the Real Estate Market.

For those of you who know me, I rely a great deal on numbers and statistical data to do my job. Numbers are an objective measure to help determine a house’s value, and numbers don’t lie!  Whether you are purchasing a home or selling one, it is important to understand the role the data play in determining the relative value of a home and in determining how many properties may be directly competing with that home as well.  One way to determine this is to calculate the Absorption Rate in a given market.

What is the Absorption Rate?

Simply put, it is an indicator that demonstrates the Supply and Demand in the marketplace. It is the number of months of inventory on the market, and the length of time it could take to sell the current inventory, based on a specific set of parameters, such as house style, age, size and location.

Why is it Important?

You all heard that Supply and Demand affects price. Supply and Demand are variables that we can do nothing about as consumers – they fluctuate up and down depending on the current market.  The variable we can control, however, is price. That is why setting the right price is CRUCIAL  to achieving good results when selling. Conversely, overpricing will hurt a seller’s overall objective – to sell for the most money possible.

How is it Calculated?

First, establish the specific parameters for the market you wish to examine, such as a particular neighborhood, house style and size. Second, find the total number of sales for the past year. Third, take this number and divide by 12 to calculate the total number of sales per month. Next, take the CURRENT number of homes available (not sold and within the same parameters) and divide this number by the average number sold per month. This final number will give you the Absorption Rate in months.

What Does this Number Mean?

If you get a number that is, say 4.6 months, that is generally considered a Balanced market, where Supply and Demand are basically “even” and do not favor either the Buyer or Seller.

If you get a result in the 3’s or lower, that means we are in a Seller’s market, as there are less months of inventory to choose from. Properties tend to spend less time on market, and there may be a greater likelihood of multiple offers, as buyers are competing over fewer properties.  If these conditions persist over a period of time, it may also result in a higher average sale price as well.

If the number that you come up with is 7 or higher, it is safer to say you are in Buyer’s market.  Properties take longer to sell and may sell for less money if these conditions continue over a period of several months. It is critical to price a property accordingly or it will sit on the market and  depreciate over time, becoming less valuable to the Buyer.

If you would like to know the Absorption Rate for your area, I would be happy to help! Contact me, and I will pull the data for your area, help you determine what kind of market you are in, and advise accordingly!

Forecasting what will happen in the Housing Market in Edmonton and Sherwood Park is a bit like trying to predict the weather.  There are so many variables to consider that affect real estate values.  But, like the weather, we can make some well-educated guesses based on statistical data and the opinions of Economists, real estate investment experts, and Realtors (R) themselves.  Here are some trends to expect in 2015:

1. Prices will continue to rise, but at a slower pace than what we saw in 2014.  We are expecting prices for single family homes to increase anywhere from 2- 3.5% this year, based on tight supply and high demand.
2. We are not expecting a drastic increase in Interest Rates.  It is generally predicted that if Interest Rates rise, it will not be by much (i.e. 25 basis points) and will occur in the 3rd or 4th Quarter of this year.
3. Inventory is currently low and Buyer demand remains high. Despite the drop in the price of oil, the market is tight, particularly with homes in the $350,000 – $450,000 range. So, if your home falls in between this range, this is an incredibly good time to put it on the market!  Just make sure to give yourself a long Possession date so that you have time to find the home you want, as we are predicting more inventory to come on the market as we get closer to Spring.
4. We are continuing to see high demand in the $1 million+ plus homes, which is an indicator of not only higher incomes, but also Consumer confidence in the Move-up market.
5. Because the average price of a home has continued to rise, we will also continue to see Condo and attached housing sales increase, as these are typically more affordable than single-family homes.

All in all, there is NO talk of a Housing Bubble, although you sometimes hear this in the Media. The overall Consensus is that the Edmonton and Sherwood Park Markets will show Slow and Steady Progress in 2015.  This doesn’t make for fancy headlines, but is good news for Buyers and Sellers alike!

If you would like to know what is happening in your specific area, supported by concrete data and statistics, please contact me to arrange a meeting to see what you potentially get for your home today!