I have blogged recently about the number of months that certain price points are staying on the market. As a result of that blog, the question has been asked, "How exactly do you come up with those numbers?"
Those "numbers" or months of inventory are figured by using an absorption rate formula. Relatively easy, here's how it goes:
Take your subject neighborhood or micro area...let's say it has 20 listings on the market and 4 that have sold in the past 6 months...
Take the supply (4 sales divided by 6 months) = .66
Divide those 20 active listings by .66 = 30.30 months
That means that if there are no new listings, it will take over 2 years to sell the existing inventory if no new listings come onto the market...
So let's do another:
As of today in Abington there are 16 active listings and 11 have closed in the past 6 months.
11 sales divided by 6 months = 1.83
16 listings divided by 1.83 = 8.74
Which means that currently it would take close to 9 months to sell all of the listings currently listed in Abington.
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