Rapid shifts in the real estate market in the past two months have triggered mixed and conflicting news reports. In the midst of increase of inventory, slow down of number of sales and price adjustments across all market segments low inventory continues to be a basis of optimism about future values for many.
Supply and demand, a core economic dynamic affecting pricing is a bit more complicated with real estate. Various locations, property types and micro-market dynamics differ even within the same zip code.
Traditionally, to analyze market data for a property we calculate saturation rate. Or how quickly the market is absorbing similar homes to estimate whether it’s a buyers or sellers market. How does that work? Normally, we take 6 months of sales data, divide it by 6 to get a monthly sale ratio – then divide all the active listings by that 30 day number to see how many months it would take for the current market to absorb today’s active listings.
What’s the challenge? Sales data going back 6 months includes a very different market dynamic prior to the rapid inventory uptick that started in June.
As you can see in the graph for Bryn Mawr, a prime suburban township in the greater Philadelphia area, an inventory spike in June was doubled again in July.
To take a closer look at inventory levels in our prime markets, I analyzed saturation rates for our prime Philadelphia area markets using July sales data only – not 6 months of data – to calculate saturation rates.
Market shifts usually start with slight shifts in dynamics. Overall, although the number of sales are slowing and inventory is significantly higher, our market still reflects a strong opportunity to sell. However, sellers must adjust expectations with understanding the price escalations during the past 18 months were a unique dynamic, and not the current market reality.
Inventory Analysis – Greater Philadelphia Area
|Area||July Saturation||6 months data||5 year average|
|Art Museum – 19130||4.1||3.1||4.5|
|MidTown Philly – 19102||5.45||5.9||10.4|
|Old City / Society Hill. – 19106||4.6||4.0||7.3|
|Rittenhouse Square – 19103||4.2||4.6||11.9|
Luxury markets often are the most vulnerable to market shifts. Interestingly enough, analyzing Philadelphia residential sales for over $1M, the inventory levels using only July’s sales vs 6 months is more favorable for sellers. Traditional inventory levels (using 6 months of sales) are 5.35 months. Using only July’s as a basis, it’s 5.11.
Deciding whether now is the best time to buy or sell real estate can’t be answered in a sound bite. It’s important to have high level advisory services to analyze the market trends, review financial options and have an honest assessment of pro’s and con’s for your individual situation.
Please book a good time to chat, and we’ll go over all the options today’s market holds for you. If you’re thinking of selling, feel free to start with my instant home valuation, then let’s talk.
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