Blog Reader Question:
I read an article that said anything over 6 months inventory is a buyers market. How many months inventory is there in Estes Park, CO?
Answer:
The amount of inventory a specific location has and how fast it will take to sell that inventory is called absorption rate. The Absorption rate calculation is a standard that many people including banks, appraisers, investors, real estate agents, and consumers use to describe the overall health of a real estate market place.
Estes Park is a very unique market. Traditionally, we have seen a balanced market to be around 8 to 10 months of inventory. This is what we had when we were enjoying fairly steady 3%-8% appreciation per year.
Currently as of this blog post, we have around 20 months of inventory which definitely qualifies the Estes Park real estate market as a buyer’s market. Other evidence pointing to the same conclusion is a continuing reduction in the sale price to list price ratio. We are also seeing a large amount of price reductions among listings that have been for sale for an extended period of time.
There are two ways to lower the absorption rate. We can either find more buyers to purchase homes or have more sellers remove their homes from being listed for sale to reduce the inventory. If the absorption rate continues to stay high, the law of supply and demand will eventually decrease property values in the area.
