How Do You Measure Your Town's Real Estate Supply?

For those of you looking for a new home and having a hard time finding one, you will have a longer home search. For the people looking to market you property, you can expect to sell your home closer to the asking price and in a shorter period of time. Inventory is at an all time low in the Morristown Area. 

The best way to explain the Absorption rate is to compare it to something more easily understandable. Let's take the price of oil and it's most used product, gasoline. As we have seen over the last 5 years, the price of gas has risen dramatically. The root cause is a shortage of supply. The shortage is being caused by lower production and developing countries like China and India buying more oil to fuel their economic growth. This in turn puts pressure on the suppliers and refiners who can not keep up.

Now, let's look at the housing market. There are several factors driving demand for housing. Low interest rates and pent up demand which has been building since roughly 2007. Buyers have been hesitant to make a purchase due to economic conditions. Now, that the economy has somewhat stabilized and rates remain low, buyers feel that now is the time. Home prices have hit bottom and in some cases have risen. U.S. home prices jumped by the most in 6 ½ years in December, with Arizona posting the highest surge among states.

Steady increases in prices are helping fuel the housing recovery. They’re encouraging some people to sell homes and enticing would-be buyers to purchase homes before prices rise further.Higher prices can also make homeowners feel wealthier. That can encourage more consumer spending.

Most economists expect prices to keep rising this year. Sales of previously occupied homes reached their highest level in five years in 2012 and will likely keep growing. Homebuilders, encouraged by rising interest from customers, broke ground on the most new homes and apartments in four years last year.

The Absorption Rate translates into how many months supply of homes for sale in a particular town. The theory states that when the months supply in greater then 6, then it is a buyers market. When the Absorption rate goes below 6, the it is a sellers market. Here are the Absorption Rates for the surrounding area.

Morristown-5.82 months supply

Morris Twp-4.95 months supply

Morris Plains-1.64 months supply (WOW! time to sell)

Madison-7.2 months supply

Harding-14 months supply (WOW! buyers market)

Florham Park-4.48 months supply

Mendham Boro-12.3 months supply

As you can see by the above data which is supplied by the Garden State MLS, Morris Plains has the lowest inventory and is a SELLERS MARKET. On the flip side, Harding has a 14 month supply and is a buyers market.