By Gary and Sandy Elliott
Realtors often use the term “absorption rate” to help understand real estate activity in segments of a market. One definition of absorption rate is how many months it would take to sell all the active listings if no new condos came on the market. Using this definition, six months of supply is normally considered a balanced market. If a segment has more than six months of supply, then the buyer has an advantage, and if the market has less than six months of supply, the seller has an advantage.
Both sellers and buyers benefit by knowing the applicable absorption rate for a condo they are buying or selling. The attached charts give an indication of the condo real estate market on Marco Island. To calculate the months of supply, the number of active listings are divided by the average monthly sales during the last 12 months for a particular price or geographic segment. On the charts, those segments with less than 6 months of supply are marked green, and those with more than 6 months of supply are marked red. It is readily apparent that condos listed for under $200,000 are in short supply. Higher priced condos have more than six month’s supply, and those listed for more than $2 million have a 25-month supply.
Regarding island location, only inland condos are in short supply and show up as a green bar. There are plenty of beach front, water direct, water indirect and Gulf condos listed for sale at various price points as indicated by the red bars. However, it is important to consider each individual condo building because some popular condos have little or no inventory and others have several months of inventory.
During the last 12 months, 560 condos have sold on Marco Island, or 47 per month on average. Today, there are 326 condos for sale, resulting in an island-wide absorption rate of seven months — just over the six month balanced market. This season should continue to see a high demand for condos, and what may be considered a buyer’s advantage going into the season may well end up a seller’s advantage in a few months.
If you are trying to sell your condo in a short time horizon, check with your realtor for ideas on how to sell it quicker than the overall absorption rate for your segment. If you are a buyer, check out the absorption rate with your realtor to determine if you have an advantage when it comes to negotiating the price.