Everyone wants a good deal on a home when they are looking to purchase. They also want the lowest interest rate possible. What if low mortgage interest rates and low prices don’t coincide? Have you thought about how available inventory of homes and condos also impacts your purchase? The real estate market is ever changing. Homes come on the market and others go under contract practically every day. Buying a home is largely about comparison. The home you are eyeing may be taken next week and the ones you are comparing it to are also changing as properties come on the market and some also leave the market either because they become under contract and sell or they may be taken off the market. I’m not trying to scare you but I deal with these factors daily, weekly and monthly in my real estate business.
Inventory – I had a client a few years back who was looking to move to Franklin, TN from Texas. They had to sell their home in Texas before they could buy in Tennessee. When they started looking for a home to purchase, there were many options available. We viewed probably at least a dozen homes during one trip. They ranked their top choices and we created a short list of homes. It took many months to get a contract on their TX home. By the time they came to visit and really needed to buy, our Middle TN market had changed and there were very few homes to select from. Timing changes your options and you can’t be very particular about the features and details of your next home when there is little to choose from.
Price – Average sale price in Williamson County has risen 20% from 2011 to 2015. The appreciation between 2011 to 2012 was just 1.5%. Home prices did not fluctuate much between 2009 to 2012 but they have increased significantly in the last three years! Our real estate market is expected to continue appreciating for the next 4 to 5 years.
Absorption Rate – Absorption rate is the number of months it will take for the current inventory to sell. Below is a table that shows the absorption rate for single family homes in Franklin, TN based on sales data on MLS between December 2014 and November 2015.
|Price Range||Absorption Rate (Months)|
|$200,000 – 299,999||1.3|
|$300,000 – 399,999||2.6|
|$400,000 – 599,999||3.4|
|$600,000 – 799,999||5.3|
|$800,000 – 999,999||7.8|
|$1,000,000 – 1,999,999||10.2|
Generally, an absorption rate from 0 to 4 months is a Seller’s market, 5-6 months is a neutral or balanced real estate market and 7 months or more is a Buyer’s market. This table shows how the market changes from a Seller’s market at the more modest price range to a Buyer’s market in the luxury range. It’s important to note that the market conditions vary greatly depending on the price and location.
Interest Rate – Interest rates have been low for many years. Anything under 6% is considered low but I’d much rather have a 4% rate on a 30 year fixed rate loan than 5%! Rates are predicted to go up. When rates do rise, it will affect the buying power of everyone who is getting a mortgage. Rates impact the number of buyers who can afford your home if you need to sell too!
I’m glad to help inform you about the current market conditions in your specific area and price range. Once you are informed about the local real estate market, you can feel more confident to make the right home buying or selling decision. Please remember that there is not perfect home, in the perfect location with the perfect price. There are always compromises to be made! It’s up to you to draw the line where a property no longer satisfies your goals.