Dear Buyer,

The big question in the real estate market today seems to be “where is the bottom” and “when will we see the bottom? I have listened to several different people all having a different view on this subject. Some of the different answers I have heard include “when rentals go up and condos can cash flow”, and, “when prices get down to 2004 prices”. I have heard it said, “when interest rates drop”, or, “when it reaches a certain amount per square foot”.

I decided to look into this further myself to see if I could come up with anything of substance that people could actually look to for the answer. After all, there is a volume of numbers and statistics available and somewhere in all those numbers should be something we can draw from. So I started looking at numbers and something jumped out at me right away. A huge indicator of how “healthy” the real estate market is involves a formula referred to as the Absorbsion Rate. This formula involves the number of properties listed in a given area and the average number of days on the market before these properties are sold. This is a very useful tool in determining the state of the market, however, I was trying to determine “where the bottom” is and when will I know it’s here.

It dawned on me that in order to answer this question accurately I would have to determine where the “current bottom” is and the state of that before drawing any conclusions on the future. This is where I found the most useful information I could possibly uncover and showed me the answer is right in front of us all.

Rather than look at the DOM, or, Days On Market, on properties that have sold, I dug further into how long after a “price change” did it take for that property to sell. It doesn’t really matter how long a property was listed during a period when it was over priced does it? I mean we really want to determine “where the bottom” is now to get an idea of how “anxious” buyers are right now. If they aren’t making a move now than how long before they do”? That’s the question, right?

I went thru a list of “Sold” properties not paying attention to any particular one but going back into the “listing history” to see how long that property took to sell if it had a price reduction. The results were actually stunning. Remember, the Absorbs ion Rate is considered “healthy” if property sells over an average of ninety to 120 days from the listing date. What I have uncovered is the reaction time of buyers when properties reached a certain price point. I found this out by measuring the amount of time it took listings to sell after being reduced in price equal to the price other properties have recently sold for.

Knowing that an average listing lasts approximately 120 days on average in a “healthy” market how long do you think it takes buyers today, that’s right now, to make a decision on a property at “today’s bottom”? One hundred and twenty days? Ninety days? Sixty days, maybe? How about TWENTY-SEVEN DAYS. That’s right folks. Properties priced at today’s bottom are staying on the market ONE FOURTH of the time frame normally seen in a “healthy” market.

What does all this mean? I’ve been waiting for this part. This means that price-wise we have more anxious buyers waiting for sellers to bring their price down to “today’s bottom”. I have news for you. They aren’t waiting folks. Those buyers out there right now are taking up those good buys you were anticipating to see come down even further six months or a year from now. Guess what? It’s not going to happen. Well, why not?

Here’s the secret to where the bottom is and where it’s going folks:

Because they current seller KNOWS they only have to come down to “today’s bottom” for all of TWENTY SEVEN DAYS to secure a contract. That, my friends, tells me we are standing on the bottom as we speak.

Today or tomorrow someone is going to sign a contract on a property you have been hoping will be priced even lower sometime down the road and you will end up doing the coulda, woulda, shoulda dance. In my twenty- five years of experience I have come to understand it costs people a lot of money to learn that dance.

Sincerely,
Pete Perkins,
Ono Professional Partners