How Does Inventory Accumulation Knowledge Help Buyers Find the Best Homes for Sale?
At this time of year, real estate agents sometimes focus on the phenomenon in real estate called inventory accumulation. This is commonly described as the number of houses sold compared to the number of homes available for sale and is generally expressed by the number of months it would take to sell all homes in the inventory. It is also called absorption rate.
Good real estate agents know that it only takes one house to satisfy a buyer—as long as it is the right house! When inventory accumulates, it could either be that buyers are not buying or that the houses on the market are “left overs”, or houses that buyers do not want. Sometimes it is the season, sometimes the pricing, other times it is the condition and less frequently, it is the decorating. A good real estate agent will be able to counsel a buyer to see past the decorating if the house is otherwise a good one.
Here is an explanation of inventory accumulation numbers.
· 1 – 3 Months of Inventory Accumulation
This is a Seller’s Market. Not enough homes are available to meet the demands of the buyers. Bidding wars with multiple offer situations can occur. During this type of market sellers generally will not accept home sale contingencies or delayed closing dates.
· 4 – 5 Months of Inventory Accumulation
This is considered a Balanced Market. There are sufficient numbers of buyers to purchase the supply of inventory that flows into the market and there are enough available homes from which to choose. In a balanced market, bidding wars are rare and price negotiations are likely.
· 6+ Months of Inventory Accumulation
This is a Buyer’s Market. Homes that are priced well and in high demand areas will most likely move quickly and homes that are overpriced or in low demand areas will take longer to sell. In this market condition, sellers are more likely to accept home sale contingencies.
Right now, in Delaware County, the number is 6.1, slightly tipped in favor of the buyer. In Montgomery County, it is 5.3 and in Chester County it is 4.8. Those counties are enjoying a more balanced market right now.
While many factors contribute to the status of the real estate market, a real estate agent who is knowledgeable about inventory accumulation, will know which home is best suited to meet a buyer’s needs. A surplus of houses generally allows buyers more flexibility with pricing in a Buyer’s Market, but availability may be limited in certain high demand areas. In contrast, if the price of a house is too high or in a low demand area, selling can take longer. Having fewer homes in a Seller’s Market can raise a different set of circumstances for buyers. A number of things can happen when houses are not readily available: multiple bids can be placed on a home, closing dates can be delayed, and the seller may not grant certain provisions. If the market is balanced, there are enough buyers to purchase homes and a well-rounded number of houses from which to choose. There is less competition and pricing negotiations are likely. A buyer’s real estate agent should know the current market status of the area in which a buyer is seeking to purchase a home. This can greatly affect what leverage a buyer may have when making a deal or what a buyer may have to forego in order to own the right home. Our agents can help you navigate any of these market types to help you find your dream home.
For more information about the current real estate market and homes for sale in your area, contact Sage Realty LLC at 610-687-4000. Our Philadelphia Market Statistics Page also offers resources to find the latest reports on the market. Learn more at: https://www.findahomeinpa.com/buyer-resources/philadelphia-market-statistics/