Nevada County Real Estate Market Snapshot - Absorption Rates
July 29, 2009 – The listing count for Single Family homes in Western Nevada County has been relatively steady at 800-850 over the first 6 months of 2009, with a slight upward trend, and is currently at 854. Even with the fairly steady inventory, sales volume is up considerably in the second quarter compared to the first quarter, an increase of over 50%.
The absorption rate for a market is the percentage of total inventory that is sold in a given month and is related to the supply of homes. For example, a 10% absorption rate represents a 10 month supply of homes and a 25% absorption rate reflects a 4 month supply of homes.
For the month of June 2009, during which the total listing count was approximately 850, 85 homes were sold. This is an overall absorption rate of 10% or a 10 month supply of homes. This compares to the supply in a "normal" market of approximately 5-7 months, and to the year ago period when the supply was approximately 14 months. Unit Sales have improved in the second quarter of this year.
When we break down our total inventory into the 3 main categories of non-distressed sales, short sales, and bank owned properties (REO), we see varying absorption rates. The breakdown is as follows: Of the 855 total listings, 677 (80%) are non-distressed, 140 (15%) are short sale, and 40 (5%) are REO.
The absorption rate for non-distressed properties mirrors the overall rate at 10%, while the rate for REO is a whopping 30%, and the rate for short sales is under 4%. The REO properties are selling through quickly, with a 3 month supply, the non-distressed sales are at a 10 month supply and short sales are above a 2 year supply. This is a highly segmented market and will slowly converge as the recovery unfolds.
What this all boils down to is that the overall market is recovering, the REO properties are selling quickly (this is key to the recovery) and short sales remain the most challenging segment of the market, with lenders seemingly preferring to foreclose rather than to accept short sales. As a result, most of the short sale listings will eventually go through the foreclosure process before selling in the open market.
We would like to see a longer trend of brisk REO sales and a continuing decrease in the overall supply of homes before we claim that a recovery is underway, yet the signs are encouraging.
Paul Sieving is a Realtor® with CENTURY 21 Gold Dust Realty, has been Chair of the MLS Committee and a Director of NCAOR and Board Chair of the Grass Valley Chamber of Commerce, while serving our community as a real estate professional for 10 years. Comments, questions and thoughts are welcome at Paul@PaulSieving.com or (530) 274-0906
