There are a lot of numbers involved in the world of real estate. Maybe that’s why it’s so intriguing. They tell us the good, the bad and the ugly.
Today’s “ugly” is a low home inventory. And it just keeps dropping.
One way we measure housing inventory is with something called the absorption rate. There are a couple of ways to define it, but most simply, think of it this way.
If home sales continue forward at their current pace, how many months will it take to sell all of our current housing inventory.
We can also use it to determine if a given real estate market is a “buyer’s market” or “seller’s market.” Follow common sense and see that when more homes are available, buyers have more choices and, therefore, more power.
Now let’s see where we are here in Louisville.
Each market is different, but experts believe a six-month absorption rate is considered a balanced, healthy real estate market where buyers and sellers are evenly matched.
The absorption rate for Louisville was just 3.96 months in February 2015. I expect this number to rise over the next few months as weather warms and we head into the selling season. Yet this marks the lowest value in more than a decade.
In related news, delinquency rates, which lead to short sales and foreclosures, have been steadily declining. This is a good thing. CoreLogic reports that the 90+ Day Delinquency Rate for Louisville-Jefferson County in January was 3.92 percent, the lowest since the housing recession.
Having fewer distressed properties on the market means more families are staying in their homes. It also means fewer homes are being listed for sale.
Thus we come full circle. Where are the properties for all the buyers out searching?
It will be interesting to see if the continued efforts to keep interest rates artificially lower will be enough to entice homeowners into the market. Odds are, rates alone will not be enough.
There were 1,526 new listings added in February 2015, almost identical to what was added last year. But because of the low inventory levels, our current market needs much more.
As of this moment, there are only 3,092 total listings in Jefferson County. Remove condos and we drop to 2,404. For a city our size, that’s a seriously low number.