What is an absorption rate and why do I care?

In my page about the local market, I explain that the absorption rate is a number that reflects how many months it will take to sell all the houses currently on the market–basically, how fast the market can absorb the inventory.  Experts agree that if it takes 5 – 7 months to sell a house, that can be considered a balanced market.  Shorter than that is considered a sellers market and longer than 6 months is generally understood to be a buyers market (of course, these are general terms–don’t get too wrapped up about the exact number of months.)  The chart below shows the latest numbers, and they vary only slightly from last month’s numbers.

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So, just looking thru the data, houses listed for sale for less than $150,000 are still selling in under 6 months time.  That accounts for over 50% of the houses currently on the market.  Note, also, that houses listed for sale over $225,000 are taking over a year to be absorbed.

Now, here are the factors to consider about what all this means to you:

• Home Sellers – houses do not sell in the order in which they come on the market.  A fairly priced house that is in great condition and in a good location will sell much more quickly than the absorption rate implies;
• Home Buyers – the market is not terrible, but there are plenty of really great houses available and sellers may be willing to negotiate more;
• Investors – Fayetteville is a great market with a lot of affordable homes that still offers outstanding potential to build wealth through real estate.

Lastly, remember that absorption rates are a lagging indicator of the market.  The numbers are based on how quickly homes have sold over the past 12 months.  They don’t offer a prediction of what will happen in the future.  The future of the local market is controlled by population growth and economic/job growth.  These factors bode well for the Fayetteville market, which is tied very closely to Fort Bragg, and is expecting an substantial increase of higher level military and civilian postions as military bases are realigned under federal law (Base Closure and Realignment Commission – BRAC.)

Shane! Shane! Come Back!

Wait, Wait, Don’t Tell Me…

Every successful writer for executive-level thinkers knows that for the sake of clarity and brevity, one must always put the bottom line up front; BLUF.  So, before we get back to Twitter and theorizing about social network marketing and human connections, I have to tell you the real secret to business success (or any other success) is extremely simple: tithe.  I’m not kidding.

“…and thus put me to the test, says the Lord of hosts; see if I will not open the windows of heaven for you and pour down for you an overflowing blessing.”  Malachi 3:10 (NRSV)

My husband and I tithe on every single penny that comes into our businesses or our family.  We give 10% back to God, and then we do taxes, bills, savings and all our wonderful little marketing experiments with whatever is left.  I have to tell you, it has worked stunningly well.  I continue to get listings and sell houses at a successful rate, my business and market center continue to grow, and our troubled little property management company has increased by over 400% in the last year and a half.  Now, there is no doubt that we work hard and try to treat our clients and employees well, but we haven’t done anything that even comes close to our best marketing effort and have been hugely distracted by other challenges over that same period of time.  To boot, the real estate market here in Fayetteville, NC, as elsewhere, has made a dramatic shift.  Still, success comes.  So, it really isn’t us, it clearly is Him, and if you are a Christian and are not tithing, I encourage you to start.  We have never, not one time, hear me–NEVER–gone without in the entire time we have been tithing, and we have enjoyed a continuing period of blessing even though we’ve made some pretty boneheaded business mistakes.

“Back to the Casbah and the Business of Spying…”(Dan Jenkins, Semi-Tough)

But, back to our story.  My first thought during that challenging time was that we should create or pay for a new website that was hi-speed, Google-page-rank-centric,search engine optimized, blog-errific and sure to get us back to the top of the search engines like we were in the good ole’ days.  We looked around, considered contracting Hobbs and Herder, put a notice out on E-lance, and got too busy to follow up on any of it.  One day, to my great dismay, I opened my website to do some maintenance and found that everything had either disappeared or changed.  Fonts were all messed up, pictures were re-sized or missing, buttons and links were not working.  This website that I’d spent so much time on, that albeit a template site, still got plenty of use and some pretty good reviews, was just about worthless.

I closed it that day, signed up for a WordPress account and started re-learning everything.  I created a LinkedIn account because I got a request from a friend, a fellow Realtor®.  I started a Twitter account because I’d read about it somewhere.  And, I added a Facebook account because everyone in my family that I was hounding to join Twitter kept asking me what was the difference between a tweet on Twitter and an update on Facebook, and I couldn’t answer them.  It was slow going, and I’m still not even close to finished, but one thing troubled me even as I schemed to have the best real estate website and social network in Fayetteville…my business had continued to grow and my clients continued to use me even though I had no usable website, no on-line social networks, and none of what the bloggers were saying was “must have.” Another “seems to me” moment?

Oh, That Explains It.

You know, Keller Williams is an “open book” company.  I love that, and it forces you to do 2 things–keep really good books, and look at them often.  After one particularly heated meeting among the fellow owners of our market center, I went to get some numbers to prove my point (which was a pretty forgettable one) and in my research, I pulled up the last 3 years of my production since joining the company.  I set it aside with the intention of doing some real hard analysis, and a few days later, I noticed this exchange on Twitter between @ResPres (Jeff Turner) and @Ribeezie (Ricardo Bueno):

These 2 were discussing a post on Ribeezie’s blog in which he’d pointed out that many people were missing the point of social network marketing–that it wasn’t about numbers or ratings, it was about people.  He used a quote from Seth Godin to make that point and that pulled a lot of things together for me.  I went back and looked at my numbers for confirmation, but I already inherently knew what I would find.  My business had come from 3 sources: previous clients and their referrals (over 60%), listings in two neighborhood farms in which I had proven results or listings that came from people seeing those results (another 25%,) and a white-hot buyers agent who could convert internet leads which had come in from Realtor.com Featured Homes™ or my own website.  Of those sources, the first two accounted for the bulk of my production and those were built on connections I had with people.  Furthermore, I had lost my buyers agent and hadn’t found any suitable replacement, and my business had not suffered unduly.

From Tweet to Tweetup – Finally!

One day last week, I had my first tweet-up ( a meeting with others who you follow on Twitter.)  I went to lunch with @bluedevilmsn, who I met on Twitter (see this post) and with whom I had been trading tweets and direct messages.  I found a new friend and a great connection!  We had an enjoyable lunch and I realized as I drove home (rode off into the sunset like Shane) that my business was built on these connections and that I LOVE that.  I also realized that Twitter, Facebook or any other social network site is not a farm and not a magic database that will drive my business.   But, they are a great way for me to connect to people, they help me do it better and more inexpensively, and it is fun and exciting to use them!  Still, you have to go from on-line to in-person at some point.  Despite all the bloggers and all the advice about gee-whiz technologies, page ranking, search engine optimization, and maximizing popular social networks the best advice I have gotten, and the only advice I’ll pass along is this:  By all means, build a great web presence, but, it seems to me that when you connect with your people they become your clients and if you serve them well you will build a business that withstands shifting markets, internet trends and personal difficulties.

“May the favor of the Lord our God rest upon us; establish the work of our hands for us–yes, establish the work of our hands.”  Psalm 90:17

In my page about Fayetteville Real Estate Market Information, I explain that absorption rates are a way of showing how quickly homes are selling.  This chart shows, based on sales over the last 12 months, how many months inventory there are for homes in each price range.  Take a look at the following table:

Absorption Rates November 2008 - Existing Home Sales

Here’s the bad news (if you are a real estate agent or a home seller.)  Right now, in every price range over $150,001 there is more than a 6 month supply of houses on the market, and for price ranges over $225,001 there is over a year supply.  For price ranges below $150,000 there is a 5 month supply on the market.  By most expert opinion, this data suggests we are in a buyers market and it certainly shows that the market in Fayetteville is much more sluggish than usual.

But, statistics can be misleading, and here are a few facts to consider:

• absorption rates are a lagging indicator of market activity–they look back over the last 12 month period, not forward;
• houses do not sell in the order they come on the market.  The fairly priced house, that is well maintained and in a good location will sell more quickly than other houses, and it will have more buyers interested in it;
• 67% of the houses for sale in Fayetteville are priced under $175,000 and those price ranges sell more quickly, even if there are more houses available.

Additionally, if we compare the number of houses on the market to the last report, there are more homes for sale in the lower price ranges than last time, and fewer homes for sale in price ranges above $175,001.  This indicates that some sellers may be waiting for conditions to improve before they list their house for sale.

Okay, so what does this mean to you?

• If you are considering selling your home, or if you already have your home on the market, you will have to make sure your home is priced right and in good condition if you want to sell it quickly.  Good marketing, including proper maintenance and staging of your property will make a difference.
• If you are a buyer in the market for a home right now, you will have a good selection of homes available, and sellers may be willing to deal more than they normally would.  In the Fayetteville market, it is not at all unusual for sellers to contribute to a buyer’s closing expenses, and if you are planning to use a VA loan to purchase your home you may be able to buy a home with very little out-of-pocket expense.
• If you are an investor, there are good properties available.  Anecdotally, the rental market in Fayetteville has improved appreciably.  Houses seem to be renting faster–it may be that more people are choosing to rent over buy while they wait for economic conditions to improve.

Selling or buying a home right now requires a little patience and an experienced broker if you are hoping to make the best of market conditions.  Please email me or call me if you want some advice or are unsure of the best way to proceed.   You can still meet your objectives for buying or selling even in the current market.