The Headrick-Wagner Report
Create Your Own Market Report
CALCULATING INVENTORY LEVELS
An Absorption Rate is the total sales to occur per month. Typically it is derived over a period of 6 or 12 months. (i.e. 60 sales occurred in the past 12 months indicates 5 homes sell per month) The Absorption Rate is 5/month.
The Inventory Level is the relationship between the total number of listings available and the absorption rate. It is reported in "months supply." (i.e. if there are 10 on the market, and the absorption rate is 5, that results in a 2 months supply of inventory.
technique is valuable to appraisers and real estate professionals in both
macroeconomic and microeconomic situations.
Macro markets may include regions, MSA’s,
counties, parishes or individual communities.
Micro markets could include neighborhoods, subdivisions, school
districts, property types, and price ranges.
market studies include Pending Sales.
We believe this data to reflect the most current actions of the
real estate market. Some do not
include pendings in their absorption rate analysis
and if that is the case, we would then consider an undersupply to be under
4 months, a balanced market to be 4 to 6 months, and an oversupply to
be greater than 6 months.
Knowing your area
The basic algebraic formula:
Months Supply = A / [(P+S)/12)]
# of Active Listings
Months Supply of Inventory (MSI) - What it means?
* Less than
2 Months of supply will place strong pressure on prices upward, that could
result in as high as double digit appreciation.
Now you can utilize your own market data that you research and calculate your absorption rate. Only three simple statistics need to be created from your own custom MLS search – the total number of Active Listings, the number of Pendings and the number of Sales to have occurred in the past year.
You may utilize the output for your marketing materials by printing off the output page.