There is an interesting metric used in the real estate business to evaluate the nature and health of the market. It is the ‘absorption rate,’ or the rate at which listings in inventory are absorbed by the pool of active buyers. It is calculated by first discovering how fast homes sold during the recent past – say, six months – and dividing that into current inventory. If we were averaging 50 homes sold per month over the previous six months and there are 300 homes in inventory today, that means that we have a 6 month supply of listings (300/50).
If all of that math makes your head hurt, don’t worry; to understand absorption rate you don’t have to know how to calculate it.
What does this mean to Hawaii home owners? The April 2016 absorption rate for Oahu fell by almost 12% over the previous year. In April of 2015 we had a 3.89 month supply of single family homes for sale. This April we had 3.48 month supply of homes for sale. I know the difference seems slight, but there is a trend here. Listing inventories have been slowly creeping downward for some time leaving us in a situation where there really aren’t enough homes on the market to satisfy the demand.
For condos, the decline is not so apparent: in April 2015 we had a 3.21 month supply and this year it’s 3.2 months. Condos continue to be an attractive and affordable option for new homeowners coming into the market as well as those seeking a more maintenance free lifestyle.
Here’s the thing: homes are selling, and fast. We have an inventory shortage; there are not enough homes on the market to satisfy the demand. In a ‘normal’ market, you’d expect there to be close to a six month supply of homes. Of course, here on Oahu, nothing much is ‘normal,’ so for us, four or five months would be pretty good.
For home sellers, this tight, low inventory market means that you have a good shot at selling for top dollar in a short period of time. ‘Top Dollar’ doesn’t mean overpriced. Even in the hottest markets, overpriced is still overpriced, and buyers rarely pay more than market value – or what an appraiser would determine the value to be – for a home. If you’ve been thinking of making a move, my advice would be to call in a professional – me – to help you determine what you are likely to get for you home today, and whether selling now is a good plan.
Buyers, I know it’s frustrating when the perfect home comes on the market and has multiple offers in a few days, but that’s what happens in a market like this. It is not a reason to withdraw from the process or to stop looking altogether. It is a reason to get your ducks in a row, your finances in order, your pre-qualification letter in hand, and be ready to move quickly when the right home appears. Prices will only be higher in another year and despite the competition today, this may be your best opportunity to own your dream home.
As always, we at Help-U-Sell Honolulu Properties are ready to bring the considerable talent, knowledge and creativity of our team of professionals to bear on your home buying or selling project. One of the things we do very well is to help people weigh the pros and cons of any real estate decision, and we offer that consultation to you with no obligation. All it takes is a phone call.
Help-U-Sell Honolulu Properties is a full service real estate company that provides exceptional service while charging less than ordinary Realtors. We’ve been successfully helping buyers and sellers all over Oahu for more than 12 years and we’d be delighted to help you achieve your housing dreams. Contact us at (808) 593-8811, or visit our website.