Solano County: a seller’s market
Is there an easy way to determine whether Solano County is currently a buyer’s or a seller’s market? You bet. Analyzing market absorption rates give a predictably clear picture.
According to investopedia.com, the market absorption rate, or months of supply rate, is the rate at which available homes are sold in a specific real estate market during a specified time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure then shows how many months it will take to exhaust the supply of homes on the market, excluding new homes added to the available mix. A high absorption rate usually indicates that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.
For example, suppose that Solano County has 500 homes currently on the market to be sold. If buyers contract for 100 homes per month, the supply of homes will be exhausted in five months (500 homes divided by 100 homes sold per month). If a homeowner is looking to sell a piece of property, he knows that half of the market will be sold out in two and a half months.
Now, let’s look at the current absorption market in Solano County.
Obviously, there is a direct correlation between market absorption rates and property values. As absorption rates drop below the “normal” level of five to six months, property values rise. As economics theory 101 notes, lower inventory spurns higher demand and therefore drives prices up.
According to various local real estate sources, the current residential absorption rate in Solano County is slightly less than three months. This is good news for sellers, who want to maximize a sales price and not have to invest too much on the front end to attract buyers. In fact, selling to a real estate investor rather than a private party might be a win-win situation. This type of transaction often results in a buyer getting fair market value without having to invest costly amounts of time and money to make needed repairs. And, even better, is the fact that investors are not contingent buyers requiring favorable appraisals to complete deals.