The 60 day absorb rate is a measure of market speed in the same way a speedometer measures the speed of a car. When we are in a car and our speed is steady (no acceleration), we can feel and gather speed impressions by relating to the passing landscape. If we are going slow, say 15 mph, we “know” we are going slow.  The market offers few visual clues as to speed and direction and can be misinterpreted or misunderstood, especially during periods of change. Like a pilot flying at night, the agent must keep his attention focused on his gauges to determine with accuracy the direction and speed of the market. The absorb rate is one such gauge.  If the absorb rate is rising the market is moving toward the seller. If declining, the movement favors the buyer.  If the absorb rate is a low number, the market is converting listing to closings at a slow or low rate. In May 2006, the absorb rate was 31% or about twice the speed of the current market.

The last report (April) returned -30%. The current result for 2008 (-14%), while negative, is a +38 point increase over January 2008 at -52%. A good way to visualize the current market versus past known results is to convert total annual closings to rates per day as in the following graph.

In March of 2008, the average rate of closings per day was 7.1. The current rate (through April) is 7.8, thus the market has sped up during the month of April over March by about 9.8%.  If 2005 is set as a reference point, the current market is operating at about 40.5% of the 2005 market in terms of closed transactions. Expect the market to continue to speed up dominated by distressed sales.  Based on these calculations, there is little doubt 2008 market will surpass 2007in terms of transactions.

In terms of current market position, the market should be judged as favoring the buyer.

In terms of movement, the market should be judged as moving toward the seller. Key measures are no longer declining and have begun to increase. The level of sale pending is showing good increases. Distribution of Supply/Demand Table continues to tighten. Price, however, moved downward in the month of April.  Current indicators now indicate a future limit to median sale price of about $190K. Median sale price will fall below the benchmark $200K level no later June 15. As in any market, prices may fall then rally and recover. However, this outcome would be a very low probability event in this instance.

The reader should note that Percent Selling (market efficiency) has stabilized

and has begun to increase (see arrow).  This is a signal the market has bottomed in terms of demand and is now on the rebound. Percent Selling should begin to increase slowly as a result of the more competitive price schedule offered by sellers and the favorable market cycle (Spring). These are the first tentative steps to market recovery from the seller’s perspective. Seller equity positions will continue to erode exacerbated by the price competition of distressed sales.  Every seller on the market should be made aware there is a real cost associated with each additional day on the market.