Absorbtion Rates Tell A Story

 Posted by at 6:42 am
Dec 262007

We now have the latest Maine Real Estate Information System statistics. Let’s remember these numbers are through October so we’re not actually looking at what’s happening right NOW.

The short version is that the pattern continues. For the month of October, unit sales statewide were down some 12% from last year.

Looking at the rolling quarter (August through October) we learn that Piscataquis County is experiencing an 8% decrease. Somerset is down 5% and Penobscot just under 4%.

Interesting stuff?

Here’s something more interesting, particularly if you are considering listing your property for sale. Most of us remember “supply and demand” from our high school economics class. In real estate, we can use something called an “absorbtion rate” to consider statistically what might happen when we list based on supply and demand.

For no particular reason I’ll use Dover-Foxcroft as my example. It’s a great town that happens to be the county seat for Piscataquis County. My example uses MREIS data and does not include properties sold by owners or real estate companies who are not part of the Multiple Listing System.

When I wrote this in late December 2007 there were 84 residential properties “on the market” (for sale) in Dover Foxcroft. During the last 6 months, 54 residential properties “sold.” That means an average of one home has sold each week. (We’re going to keep this very basic. Statistics can make your eyes glaze over fairly quickly. Staying basic also means the numbers and conclusions are “debatable” but we are more interested in the concept than the actual numbers.)

The absorbtion rate is most simply defined as the number of weeks it will take to “absorb” (sell) the current inventory at the current rate of sales.

With 84 homes on the market (assuming no more are listed and none are taken off the market) it will take 84 weeks (that’s about 20 months) for all those properties to sell. So if you are considering putting your property on the market… think you might have to be a little patient?

Another way of looking at this: Statistically, four properties are going to sell next month in Dover Foxcroft. Those four buyers have over 80 to choose from! Who wants to predict which four are going to sell?

By the way, the most “proper” way to calculate absorbtion rate is to use the previous four week’s sales. I had to go back further because there were no sales in the immediate previous four weeks! So based on the most recent data, the absorbtion rate is actually much lower.

Again, in this example we are talking in general numbers. This type of analysis has the most meaning when we “drill down” and look at markets within the market. It’s possible a new listing (the 85th) becomes one of the first to sell. If you are considering selling your home the question becomes “How do my agent and I make that happen?”


When Is It Smart To Buy?

 Posted by at 6:38 am
Dec 262007

Let’s cut through some of the media rhetoric, shall we? You certainly don’t have to turn too many newspaper pages or visit too many web sites to hear analysis of the the horrible housing market. It’s still one of the most frequently asked questions I get – “How’s the market?” If it didn’t sound a bit smart-mouthed I’d be tempted to reply “Does it matter?”

Regardless of how sarcastic it sounds, it’s a really good question.

For most buyers, market conditions are not a major factor in the decision whether or not to buy. The reason is simple. Most are buying a home primarily as a place to live. So when we reduce the question to it’s fundamental form we have the right emphasis. When is it a good time to buy a place to live?

I can make the answer even simpler than the question: Continue reading »

Dec 162007

It’s always fun to consider writing a Christmas Newsletter. Even with all the jokes made about them it is sometimes truly astonishing. My personal favorite came a few years ago from a friend nicknamed “gloom and doom.” She wrote, in part, ”I have been well this year with the exception of some female problems… hormonal imbalance… fibroids, ovarian cysts, heavy bleeding, cramping and acute pelvic pain…” (You know I couldn’t make that up, right?) The subsequent detail included a lot more than I need to know about the female reproductive system and treatment options. The two page greeting ended with wishes for a healthy and happy Christmas and God’s wondrous blessing… I found myself thinking if that’s the sort of thing He has in mind, no thanks!

No worries, I won’t be following that Christmas Newsletter Model. Although I actually don’t mind receiving these seasonal messages because it’s also the time of year I watch the chickadees. They’re really fun to watch, these tiny energetic birds. And they have a unique ability we humans might want to give some consideration as one year winds down and another begins.

Every fall these little bundles of energy gets a whole new memory. New cells Continue reading »

Dec 142007

The only way I can make this about real estate is to allude to the last piece of real estate we occupy…

Every year I seem to get one or two emails (usually forwarded multiple times) about the project started in 1992 by Morrill Worcester of Worcester Wreath Company here in Maine. I like telling people that it’s one of the many things “us Maine folks” are proud to have associated with our state.

It started as one man’s dream to honor the memory of our veterans by placing Christmas wreaths on graves in Arlington National Cemetery. This year (2007) saw the formation of Wreaths Across America as a non-profit organization in response to the many requests from folks around the country who wanted to get involved. The results are astounding — this year wreathes will also make their way to 24 military cemeteries on foreign soil.

If you get the email, you can forward it to me – it’s one of the ones I really don’t mind getting over and over. Also, you can visit http://www.wreaths-across-america.org/ and learn more about this great project!


Who Is In The Market?

 Posted by at 10:43 am
Dec 132007

Let’s talk about buyers! Or maybe more accurately, let’s talk about the people who are “in the market” for real estate.

We could, of course, create a potentially lengthy list. In fancy terms it’s called “market segmentation.” As an agent I’m certainly interested because different categories (segments) require different types and levels of client service. If your property is for sale you are certainly interested because you and your agent better know where to look for a buyer.

Let’s start with basics. What, after all, is a buyer? Before you consider that a dumb question, let me tell you that I can name a handful of “customers” who have been “in the market” for years. In at least one case, the individual just likes looking at houses. I’d hardly call her a “buyer.”

A working definition of a buyer is this: A buyer is Continue reading »

Dec 052007

What a wonderful quote! I came across it while doing some poking around on one of my regular sites. It’s attributed to Tom Waits in a book called Step Right Up.

It reminded me of a conversation I had with an attorney friend. I was describing how students of real estate seem to develop a tolerance for shades of gray as their experience grows. Newer students approach nearly every question with a need for the “right” answer.

Dave’s comment was, “Until we have litigated every phrase in every contract, there can’t be a right answer.”

One might think that’s a bit extreme,  but contract-type questions do require some lateral and option thinking. Occasionally when students ask me those stump-the-instructor questions like, “What will happen if…?” I suggest Continue reading »


Community Information…?

 Posted by at 7:15 am
Dec 012007

One of the email newsletters I received this morning compelled that my real estate web site “must be the local authority on community and lifestyle information.” Now that’s an interesting challenge and I did think about it some. Those who know me won’t be surprised at a few of the questions I considered. How large is a community? We tend to think town = community, but not so much any more. So for that matter, What is a community and what do you need to consider when looking to purchase real estate? Continue reading »