By Harriet Murray ● Cochran Real Estate ● April 2012
There are classic indicators to gauge the health of a real estate market. Good health is when there is some equilibrium between supply and demand. Three common indicators are absorption rates, days on the market and ratio of listed to sold price.
Absorption rate is based on two numbers and shows the amount of inventory taken off or sold during a period of time. Absorption is figured from:
- The number of active listings
- The average number of listings sold per month for the previous N months.
Home sales were sluggish compared to condos in 2011.
1. Absorption of home inventory at the end of 2011 still had an 8 year supply. This was still a big improvement from Jan, 2011 when we started with a 15.8 year supply.
2. DOM (days on the market) dropped from 10.66 months in the beginning of 2011 to 2.6 months at the end. This was a reduction of 75% of inventory!
3. Sold/List price ratios started in 2011 with homes selling for 95% of asking, and ending at 80% of asking. The 20% off the listed prices helped us move into 2012 with some momentum.
Condos were active enough in 2011 and 2012 to give us some more dynamic figures.
- Absorption improved from March 2011 at 8.33 years year supply to 5.75 years in Feb, 2012.
- DOM(days on the market) went from 5 months in March of 2011 to 10 months in Feb 2012. This indicated a slowdown in sales and/or developers adding new inventory.
- Sold/List price ratios moved from 94% accepted price to 84% as of Feb, 2012.
Discounts on homes or condos continue to improve for the buyer in this market. Some pricing is now below replacement cost.
If we can move the inventory back to a healthier level of 2-3 years, we will see a return to more typical supply for a tourist market where homes are listed for a year, and it takes a year to build.
For those shopping now in our Mexican market, bargains are to be had for the next 12 months.
Harriet C Murray
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.