Wilmington NC Real Estate Absorption Rate Update

Posted on June 13, 2008 by Walt Dowdy

How well is the local real estate market doing in Wilmington NC?

2009 UPDATE:

Click Here for the lastest Market Reporting on The Wilmington Search!

Things have picked up as is expected for the second quarter in Wilmington NC. Spring and Summer are always strong buying seasons.

Since my last post on the Average Price falling, the Average Price of Home Sales rose by 11.4% from $254,197 in April 2008 to $283,213 in May 2008.

Yet price isn’t always the best indicator on the health of the market. Knowing the inventory level and the absorption rate is really key to gauging the market and pinpointing trends of the market shifting from a buyer’s market to a seller’s market and vice versa.

Inventory Level

As of the writing of this post, the current real estate inventory level in Wilmington NC is 13 months. This means it would take 13 months to sell off the current inventory of active listings.

Absorption Rate

The absorption rate should be above 50% to have a strong market. When it gets into the 70s and above, the market will be steaming hot with buyers. When the absorption rate rises, homes are bought almost as soon as they come on the market.

When the inventory level dips below 5 months and the absorption rate rises above 70%, we will see the the local demand for real estate placing serious pressure on the supply. The result? We will see the price of homes take another leap. That is the law of supply and demand in a free market place.

When will that happen?

I personally have no idea, though I have come across some really great theories out there. Nonetheless, real estate is always local and in today’s economy that is becoming harder to define on paper. For Wilmington, many homeowners do not rely on local wages due to the mobility of knowledge workers. The internet has created a new level of mobility, so with no new jobs, there is going to always be a portion of folks relocating to Wilmington just because they want to.

But I will say this: I believe quite of few people lost their shirt in 03-05 and I don’t believe buyers are going to be as gullible to fall for the frenzy next go around. Also, affordability will continue to remain an issue for a little while (on the larger spectrum). If you have an opinion, I would love to hear your thoughts in the comment section.

What is the Current Absorption Rate?

In Wilmington, the absorption rate has stayed well below 50% for all of 2008 until May. In May, the absorption rate rose to 50%, making it a balanced month. This is partially due to an increase in number of home sales for the month as well as a decrease in the number of new listings that came on the market in May. But since our current inventory is so high, we will need to several months of the absorption rate being in the 60s and 70s to bring the inventory down.

What is the Average DOM?

With high inventory levels and low absorption rates, the Days on the Market (DOM) has obviously increased. Since 2008, the average DOM has remained above 100. The average DOM for May was 109.