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Updated almost 10 years ago,
Learning to interpret market stats to understand market cycles!
Hi all - I am trying to develop a more comprehensive understanding of the market cycles in my native Washington, DC area. I am new to looking at the direct numbers from MRIS (our MLS) and GCAAR (our local realtors association), and am trying to learn to interpret them independently without consulting articles. I am running into some snags that I'm hoping you veterans might be willing to help me with.
For example, I learned how to calculate the absorption rate, which to my understanding meters how long the current inventory would last. From this you can determine whether it is a buyers/sellers/balanced market. In this example, I took the # of active SFHome listings in DC proper (according to GCAAR reports), and divided it by sales per month. 508 / 298 = 1.7 months of inventory.....and I am told that 0-4.5 months of inventory means it is a sellers market.
If I look at recent articles on the state of the market in DC, it states that things are looking good all around for the real estate market. Inventories are up a huge amount from 2013, which to my understanding would indicate a buyer's market. So I find myself wondering how to reconcile these different market indicators. My neophyte brain says "Well that's odd that that inventory is up over 50% from two years ago and my calculation says we are still in a seller's market.".....which then leads to "so does this mean we were SO far in the hole that even with that huge increase, by 'normal' standards we would still be in a sellers market, and our perception is just different at this juncture," followed by "or is my zooming in only on SFH in DC proper skewing my image?"
Should I not use absorption rate for more "macro" stuff like the overall state of the market in our area? Are yearly/monthly differences more important? Are there issues of fixed vs relative perception here?
It feels a bit like finding puzzle pieces that fit together and then not being able to fit together any of the "chunks" of puzzle I have figured out thus far.
I'd be very grateful if anyone cares to address my specific issue. I'd be equally so for any tips, indicators, or different ways of looking at stats (MLS or realtor's association numbers) to determine how the market is working.
Many thanks!