When selling or buying real estate, timing is essential. Homeowners that are thinking about selling their homes today long for the strong Sellers’ Market of recent years past. They may feel they missed their window of opportunity, and in many cases, they are correct.
Buyers think their time has come! They THINK the sellers’ market is gone, and they should now be able to buy their dream home at an exceptional deal.
“Today, we are in yet another Shifting Market, which has both challenges and advantages for sellers and buyers,” said Robert Coscia, Broker and Owner of Personal Realty Advisers. “Understanding the type of market we are in today can help sellers, buyers and investors navigate their decisions and actions to maximize their real estate investment outcomes.”
Coscia said your geographic area will determine the type of shifting market you are in. “One size does not fit all.”
Shifting Market and How it Impacts Sellers and Buyers
Local market trends around the Florida Gulf Coast indicate we are in a Shifting Market, which is good news for both sellers and buyers.
It technically still is a Sellers’ Market (low inventory), albeit not as strong as the extreme Sellers’ Market during the early COVID years. The details below show what exactly a Sellers’ Market is and how it impacts home sales.
Because the market is shifting, however, it means home sellers need to be strategic about pricing, preparing and promoting their homes for sale. For buyers, this shift means more opportunities to find homes priced fairly.
“Buyers may not get the spectacular rock-bottom deal they may be dreaming of, but the shifting market means homes are staying on the market longer, allowing buyers to find more options that will suit their needs,” said Coscia. “This also provides more opportunity for buyers to submit competitive offers without having to give up too much, as some buyers did during the strong Sellers’ Market during COVID.” Examples include bidding over asking price, forgoing contingencies, buying homes sight-unseen, and waving inspections.
Let’s look more closely at real estate sale markets: how markets and shifts are defined, what they mean for sellers and buyers, and how your real estate Broker or Realtor can help you prepare and take advantage of the market we currently are in. First, we need to understand the key indicators that measure and help us identify our market trends.
Data That Informs Us: Months’ Supply of Inventory and Absorption Rate
Months’ Supply of Inventory and Absorption Rate are two statistical concepts that measure the same phenomenon; they are statistical assessments that identify whether we are in a Sellers’ Market or a Buyer’s Market. These statistics estimate the rate at which active listings are selling in a given market – that is, how new homes coming to market for sale are being ABSORBED into the sales market.
Months’ Supply of Inventory and Absorption Rate are calculated by examining the relationship between the average number of closed sales per month (usually based on a year of data to account for seasonal shifts) and the number of active listings (at a single point in time). This can be calculated and reported in two different ways:
Months’ Supply of Inventory =
Number of active property listings for sale / Average number of closed sales per month
Months’ Supply of Inventory is a way to quantify how many months it would take the market (in its current condition) to ABSORB the entire active inventory; the number of months it would take to sell the current supply of homes currently available for sale.
- 0 to 4 Months’ Supply is a Sellers’ Market.
- 5 to 6 Months’ Supply is a Balanced (or Shifting) Market.
- More than 6 Months’ Supply is a Buyers’ Market.
Absorption Rate (Percentage) =
Average number of closed sales per month / Number of active property listings for sale
Absorption Rate explores the same data using a percentage to convey the level of absorption in the market.
- An absorption rate greater than 20% is associated with a Sellers’ Market.
- An absorption rate between 15% and 20% is associated with a Balanced (or Shifting) Market.
- An absorption rate below 15% is associated with a Buyers’ Market.
Example for Tampa Bay* (Clearwater, St. Petersburg & Tampa)
Average number of closed sales per month (for 12 months)*: 2,008
Number of active property listings for sale (Feb. 2023): 4,770
Months’ Supply of Inventory: 4,770 / 2,008 = 2.4 months
Absorption Rate: 2,008 / 4,770 = 42.1%
(*Data from StellarMLS, March 2023, for residential sales)
In the example above, Tampa Bay is experiencing a Sellers’ Market.
For comparison, at the height of the Seller’s Market (during COVID), in Tampa Bay we had Months’ Supply of Inventory close to 1 month in some communities, and Absorption Rates over 240%, indicating a VERY STRONG Seller’s Market.
Curious about the real estate sales market in your community? You can explore market statistics for your local community on our website at the link below:
Knowing statistics for your local market is helpful to understand how you are positioned in real estate investment: how best to position and market your property for sale, and how best to search for and negotiate for a property purchase. Following is a brief look at the various market types we can experience, followed by tips to deal with our current shifting market.
Low Supply of Inventory (0 to 4 months); a High Absorption Rate (greater than 20%)
A Sellers’ Market is a good time for new homes to be ABSORBED into the market for sale.
In a “Sellers’ Market,” if the market conditions remained the same, the current supply of inventory would sell in only a few months. This situation often happens when there are plenty of ready, willing and able buyers but a slim market of available homes for sale, as we had during the peak of the COVID home sale market.
In a Sellers’ Market, the demand is greater than the current supply, thus there is room for the market more easily to ABSORB new homes into the market for sale (meaning a higher absorption rate).
As the name suggest, this is a market favorable to sellers who can command a higher asking prices and who can sell more quickly.
Higher Supply of Inventory (more than 6 months); a Low Absorption Rate (below 15%)
A Buyers’ Market is a bad time for new homes to be ABSORBED into the market for sale; the market is already saturated.
Think of it as a market where supply exceeds demand: the available properties for sale are greater than the number of buyers looking to purchase property (perhaps because interest rates have hindered buyer ability). Thus, it will take more months to sell the existing inventory.
This is reflected as a LOW absorption rate (think “saturated”). It’s NOT a good time for new homes to enter a market that is already saturated.
For buyers, this market provides opportunity: homes stay on market longer making it easier to find a suitable home at a fair price, and it gives buyers more leverage in negotiation.
“That’s not to say you cannot sell your home for a strong profit during a Buyers’ Market,” said Coscia, “but it does mean you need to proceed differently than you would during a Seller’s Market, and that’s what we specialize in helping you achieve.”
Balanced (Shifting) Market
Moderate Supply of Inventory (5 to 6 months); an Average Absorption Rate (between 15% and 20%)
We are not yet in a Balanced Market, but many real estate experts predict we are SHIFTING toward one.
“This is an especially challenging time for both sellers and buyers to manage the home sale market place,” said Coscia. “We are no longer in the strong Sellers’ Market experienced during COVID, but we also are not yet in a Buyers’ Market.”
Coscia advises that whichever side of the sale you are on today (seller or buyer), it requires more research, strategy and guided action from a trusted adviser.
Tips & Strategies in a Shifting Real Estate Market
Following are several important strategies for home sellers and buyers to succeed in their real estate investments during a SHIFTING MARKET.
Strategies for SELLERS
- Reconsider taking advice from friends or family who sold a home last year when the market was on fire. That was then; this is now. Real estate goes in cycles.
- Know your local market and how your home will compare to others listed for sale. How many are on the market? How many are pending? What has recently sold? How long did they take to sell? What was the final sales price? How do property conditions compare to your home?
- Price competitively at a reasonable market value. Also know your lowest selling price.
- Position your home in its best light and consider STAGING. Consult an expert and depend on guidance from your Broker or agent.
- Curb your expectations and be patient. As inventory increases and the market changes, your home may stay on market longer and offers may fall below asking price. It may take a little longer to receive an acceptable offer, which is normal in a more balanced market.
- Pay attention to showing activity and feedback and respond accordingly. If warranted, make needed changes or price adjustments.
- Take every offer seriously and be prepared to negotiate. You may not receive a full price offer, but an experienced Broker can help you achieve the best price and terms for the market.
- Work with the most experienced real estate Broker or Realtor possible and trust their advice and guidance.
Strategies for BUYERS
- Start with a budget and stick with it. Make sure you are in a solid financial position before diving in.
- Use a mortgage calculator to estimate your monthly housing costs based on your down payment and interest rate.
- Get a mortgage preapproval. If you’re borrowing money, give yourself extra time.
- Do not sit on the sidelines thinking you can predict the future. Instead of waiting for lower prices, buy a home based on your budget and needs.
- Be armed with the most up-to-date market information to help you make informed decision.
- Avoid making too many sacrifices just to get a house.
- Don’t expect a bargain. Trust your Broker to advise you when you are getting a fair purchase price.
- When you consider purchase options and offers, keep in mind it’s still a seller’s market.
- Know that it’s not always just about price. Count on your Broker to identify and bring other factors to the table that might help in your offer and negotiations. This could include being flexible with the sellers’ needs and timeline.
- Work with the best real estate Broker or Realtor possible and trust their advice and guidance.
Trust Your Broker
Bottom line, today’s real estate market is different and changing every day, and you need to work with real estate professionals whom you can trust and who can best advise you. Your real estate team at Personal Realty Advisers are those professionals. We work in the market every day, and we stay abreast of research and market trends that will impact buyers and sellers.
We have the experience and qualifications to guide you to a successful property sale or purchase that will take advantage of the current market conditions. Contact us today to explore how we can help you with your real estate investment plans during this shifting market: 727-317-7653; info@PRAFlorida.com. We look forward to hearing from you.