Measuring Real Estate Market Strength
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March 23, 2006
There are a gazillion (or at least many) ways we can talk about market strength and it really depends on the perspective: sellers or buyers. Our MARKETpulse measures a form of buyer intensity. Values greater than 0 indicate stronger buyer intensity and values less than 0 indicate weaker buyer intensity.Here are a couple of additional ways it can be measured (using Loudoun County data):
- Sales Absorption: The ration of contracts written to the total number of properties for sale.
Let's take February MARKETpulse Data Points:
New Contracts Written = 495
Total For Sale = 2,982
The % Absorption: (495/2,982)*100 = 16.7%
Or, only 16.7% of the available homes are being absorbed into sales. From a sellers perspective: a weak market. - New Listing Absorption: The ratio of new contracts written to new listings coming on the market.
Using February Data Points:
New Contracts Written = 495
New Listings = 1,193
The % of New Listing Absorption: (495/1,193)*100 = 41.5%
Or, only 41.5% of the new listings are offset by new contracts written. From a buyers perspective: more opportunity.
As this % tends to a value of 100%, we have a pretty balanced market. If it becomes greater than 100% more contracts are written than new properties are coming on the market. For instance a value of 120% means 20% more contracts are written than new listings and total listings should be declining.
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