2010 A Transitional Year To A Stable Real Estate Market...Maybe!

Absorption rates are used in the real estate industry to determine the supply of inventory.  Basically if you were to ask me, "How long will it take to sell my home?"  I would say,"X number of months."  What I am  really relying on is the absorption rate, and how much time it takes to sell your home in a given market environment and price point.  I thought I would share with you some data  on absorption rates and average sales price in some of Chicago's North shore communities.

December 2006 through December 2009

Single Family Homes data from Midwest Real Estate Data (MRED)

2006 2007 2008 2009 Supply in Months Ave Sales Price Supply in Months Ave Sales Price Supply in Months Ave Sales Price Supply in Months Ave Sales Price Evanston 5 $620K 7 $656K 7 $617K 7 $461K Wilmette 4 $941K 6 $971K 9 $912K 6 $770K Winnetka 7 $1,640K 7 $1,687K 12 $1,498K 11 $1,403K Glenco 9 $1,327K 11 $1,457K 13 $1,308K 9 $1,138K Highland Park 9 $975K 12 $828K 13 $777K 14 $603K Skokie 5 $436K 10 $404K 12 $345K 6 $304K Northbrook 9 $746K 9 $692K 12 $665K 9 $571K Deerfiled 6 $689K 8 $717K 16 $653K 9 $522K
NOTE:  A balanced market has a 3 to 4 month supply of housing. So in 2006 we see the bubble about to burst, prices are at an all time high and the supply of home are starting to increase.  Sometime during the summer of 2006 sellers were asking agents and agents were asking agents where are the buyers?  Few if any deals were closed from August to October of 2006. During 2007 it took a lot of time to sell a house, and prices started to decline some what.  Average selling prices appear to have increased, but I think that it was just the final swan song as developers and spec builders try to unload their homes. 2008 double digit becomes the norm, especially for high end homes.  This is also the time when we find out that the really bright boys really screwed up.  The good old days, when the credit markets went into seizures, and the Fed had to pump a lot of money into the banking system.  Short Sales and Foreclosures become household words, and yep, in some communities you can see average sales prices fall between 14 to 28 percent. The real estate market ends in 2009 as a still rather weak market.  Despite efforts by the Fed to give it a kick start with loan modification programs and first time buyers tax incentives.  Prices continue to decline and the inventory also starts to decline.  What 2010 will hold for real estate.  Well agents are reporting that their public open house are well attended.  More contracts are actually closing.  Interest rates are lower, more loan applications are being made, and some banks are loosening credit.  Prices may be leveling out for January 2010, and there was another downward nudge for inventory.  2010 might be an Okay year for real estate, It will probably be a transitional year, where prices will remain stable and the market reaches the magic 3 to 4 month supply of inventory.