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So what is an absorption rate??

When I’m looking at a market to see if it’s leaning toward buyers, sellers — or neither — I look to the absorption rate. This means how long would it take to deplete the inventory at the rate that homes have gone under contract in the last 30 days. (Huh?) Read the rest of this entry »

The fall of every year has become the “buyers market” season of every real estate year in the past few. While inventory may still be tight in some of our markets in the DC area (the DMV), many purchasers have hibernated, thinking that if they wait till the spring, they’ll be able to have better luck at finding what they want.

Such thinking could cost you a brick of cash. Because = there’s another key component you overlook if you’re just keeping track of inventory as an indicator of when you should buy. It’s the interest rates. It could cost you thousands of dollars per year to wait when you consider where they are right now and what could happen by the spring of 2018.

Here are some simple calculations – if you’re buying a $500,000 house with 5% down at an interest rate of 3.5%, the payment is roughly $2,641 in Fairfax County, VA… When that rate moves up a percent to 4.5%, your cost goes to $2,915. Same house, same taxes – $3288 MORE per year…$16,444 over the next 5 years — more than $30K in 10 years.

Waiting could cost you. The smart buyer stops waiting and get’s in the game! Got a question or need professional help? Contact me here: pmms_chart8.17

If you really want to know how a real estate market is going, look at the absorption rate. The absorption rate measures how long it takes to absorb the inventory of homes at the rate houses are going under contract. I.e., if there are 100 homes and 50 go pending in the last 30 days, then that reflects a 2-months supply (100/50=2).

Sellers marketsSlide1 are under 3 months; normal are between 4-5 and anything over 6 is considered a buyers market. The DC market is pretty much a seller market all around. I measure the DC and Northern Virginia counties surrounding DC.

For more graphics, click this link to the Facebook page.

Okay, Okay – I saw a buncha my Realtor comrades grab a recent report from the BH&J Index – headlined: US Housing Market Moving into “Buy Territory.”

Well, the problem I have with that type of statement is that it treats the whole NATIONAL real estate market like it’s a stock. You know – like Ford, Apple or JC Penney. Well – it’s not. I’ve always said and will continue to stick to this gun – DON’T MAKE A LOCAL REAL ESTATE DECISION BASED ON NATIONAL INFORMATION. Oh, I’m sorry – did my CAP key get caught there?

Seriously, while this “national” index may be pointing to a “buyers” market “across the country,” don’t start writing contracts below asking price in the D.C. market. We currently are under a 1.6 months supply of homes – very hot! You will be a bidder, not a buyer. And don’t underwrite contracts in these other 5 Hot Markets, according to the National Association of Realtors. Until next time!


As you see markets around the country drop inventory and increase pending sales, the question arises – is this for real? Has the market turned around?

In the shadow of Washington, D.C. – you betcha. While some observers may say it’s all about the home buyer tax credit and low interest rates – they haven’t been watching pocket markets around the country.

Northern Virginia is one of those markets that even if you doubled the inventory – it wouldn’t be enough in today’s market environment. Multiple offers (half dozen or more in many cases) are the norm; houses selling above asking price; prices moving up in zip code after zip code, month to month and year over year.

The absorption rate is dropping dramatically. (Absorption rates are measured by dividing the number of pending sales into the number of active inventory – any measurment under 3 months is considered a sellers market).

Absorption rates are pointing to a turning real estate market

While not all markets around the country have turned around at the rate here in the D.C. area – the sellers’ market has already arrived!

During the run up last time, interest rates were in the 8 – 9 percent range – so buyers aren’t afraid of rates nearly double today if they think they are buying in an escalating market. Which is starting to happen in market after market.

For more research, see and

Until next time…

Finally — it’s not just me. Forbes magazine is letting its readers know that the DC market is on the upswing. Take a look at the link above for the Top 10 as rated by

2008 was the Year of Recovery in Northern Virginia and it will continue in 2009, but this time, with a vengeance! Northern Virginia continues to outperform the region, the state and the nation. Buyers face low inventory, competing with multiple buyers and even paying at or higher than asking price. If the market is divided by price ranges, there’s the Hot Market and the Not Market, thus, property condition is as much a factor as price.

Properties priced under $400,000 are snapped up by first time buyers, move-up sellers, and investors. Between $400,000 and $600,000, the houses are still selling that are priced right and in good condition – usually to first time buyers with plenty of cash and some move-up sellers. Above that range and it’s a tougher market. Many homes are priced right, but there are just no takers. The question of “how low can you go?” keeps being asked of sellers.

Inventory in Northern Virginia (from the border of Washington, DC, to western Fairfax County) is down 26% over the same period last year. Combine that with Pending Sales up 27% and you have buyers battling each other for the well-priced houses in good shape. Enter the all-powerful Interest Rate to home prices that have dropped over the last three months and you have a perfect storm for the advent of a Sellers Market.

Power of Interest Rates
Many times, consumers miss the importance of the interest rate. As of this writing – you can buy a home (or refinance) for 4.875%. These are rates that our grandparents haven’t even seen! What this means is thousands of dollars of savings per year on the mortgage today, compared to just a few months ago. When rates were around 7% mid-year in 2008, a mortgage of $350,000 would have run $2328. Now, it would be $1,852. This gives a buyer two choices – buy the same house for a smaller payment or move up the price range by almost $100,000. Fixed rates are tracking even LOWER than adjustable rate mortgages.

So what? Inventory is slipping – we need more houses on the market to meet today’s demand. Buyers are competing again for houses that look good and priced right. Consider two choices – 1) make the move up (or down) now, while prices are stable and interest rates are low; 2) invest at a time when the rent will cover the monthly payment.
While the local papers and television stations report on a dropping market nationwide, it’s not the case for the real estate market surrounding the White House. The market continues to respond to the job growth adjacent to the nation’s capital (+28,000 new jobs in the DC area in 2008 over 2007).

What makes the Washington, D.C. market different than the rest of the country? The job market within the market. While other cities brag about being the headquarters of Fortune 500 companies, we have something none of them will ever have – the Capital City of the United States. I like the way one colleague puts it when explaining to agents from other states: “When you can put the Pentagon, Congress and the White House in your backyard, then you’ll have a housing market like ours.”

It’s been an interesting week on Wall Street and on Pennsylvania Avenue, leaving Main Street wondering what will happen with the housing market. When you look at our numbers around the Washington Monument, and see that the job growth here has moved upward and heating up even more, it doesn’t take a rocket scientist (or political scientist) to see that the inventory is dropping, prices are starting to level and move upward, and buyers are writing contracts at a triple digit rate more than last year.

If you’re looking to move up, this is the year to take advantage of level prices so you can move up without busting your personal budget. In addition, with FHA financing requiring a minimal down payment, first-time buyers are creating a feeding frenzy in the entry-level market in all property types. We’re seeing more parents help their kids buy a house now before they are priced out of the market. Renters are getting out of supporting the landlord and beginning to build their own equity and personal wealth.

So what? What does this mean to you? Real estate is local. Despite job challenges and foreclosures across the country, homebuyers and sellers must make a decision based on the local scene. The number of foreclosures in the area is declining month after month AND they are drawing multiple offers. Traditional sales of homes priced right and in good condition still make up the majority of the market. Is now the time for you to sell or buy? Waiting too long may cause you to say in the future: “You know, I could have …”




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