by Osman ParvezI'm a big fan of Louisville. The downtown area has been thriving, with new restaurants, pubs, studios, live music, and regular events. This year, I sold more Louisville property than ever before. I feel like I've been there so much, I've become a regular - and not at the Waterloo.
It's time for a market update.
INVENTORY
The chart above shows monthly house inventory in Louisville. The blue line is 2010, the green is 2011, and purple is 2012. Like my other charts, the markers are different shapes in case you have a color impairment (that's for you, Lucas).
Only 51 homes were available for purchase in October, a decrease of 25% from the year before. The trend of decreasing inventory is now nearly two years old.
SALES VOLUME
This chart shows sales volume in Louisville. As you can see, the market peaked in June this year - a fairly typical seasonal pattern. Last month, there were 21 sales representing an increase of 23.5% compared to last year. Take a look at the next chart.
In small markets like Louisville, monthly sales volume often has high volatility. This is why it's important to look at longer periods of time to get a better sense of what's happening.
The chart above shows cumulative sales volume for a six month period ending in October. 151 houses sold during this period in Louisville, an increase of 23.8% from the year before. This is a remarkable number, it's the largest change (positive or negative) for this six month period in the data set.
ABSORPTION
Absorption is the relationship between sold volume and inventory levels. Think of it as the secret storage room at the Apple Store. If the store had 100 iPhones at the beginning of the month and they sell 25 of them during the month, the absorption rate is 25%.
Still with me?
The absorption rate for October was 39.6%, the highest level since August 2007. As you can see from the chart, absorption was also higher this year for eight of the last ten months, compared with last year.
INVENTORY vs. SALES VOLUME
This last chart is my favorite. It compares the latest monthly inventory and sales volume to the long term average for each month. The chart shows a twelve month period, but I colored the bars so you could see that the data series ends with October. The green/orange bars represent sales volume. The white/grey bars represent inventory.
The first thin I want you to notice is that sales volume over the last seven months has been 12% to 35% higher than the long term average (excluding September). Inventory over the same period has been up to 36% lower than the long term average.
For buyers, the good news is that inventory has been improving for the last few months (red circle) on a relative basis. This makes economic sense, when demand improves, prices tend to rise and the market will eventually bring more supply. But how much more supply can Louisville realistically bring in the short term? I know builders are eyeing what little remains of vacant land and new projects are on the docket, but for the time being, supply is very tight. While the last few months show it getting slightly better, I wouldn't hold your breath expecting a big increase anytime soon.
WHAT'S YOUR STRATEGY?
If you're thinking about buying or selling in Louisville, give me a call at 303.746.6896. I'm closely tracking the market for my buyers, helping them sift the wheat from the chaff. Knowing the market is one of the ways that I add value for my clients and help them negotiate a good deal. Furthermore, if you're thinking about buying this spring or summer, you should start looking right now. This analysis strongly supports rising prices in the near future. Some sellers are still pricing on 2011's market.
If you're thinking about selling, I'd love to talk to you about how to get the most possible dollars out of your sale. Positioning the property in the market (ahead of the trend), helping you prepare and market it properly, and limiting your hassle are my goal with sellers. I might even already have a buyer.
---Note: Our goal is to provide exceptional service to our clients. The ideas and strategies in this blog post are the opinion of the writer at the time of publication. Silver Fern Homes recommends careful and complete due diligence before buying or selling real estate or other investments. Consult with your professional advisers before making financial decisions. This article is not intended as legal, tax, or investment advice. Silver Fern Homes will not be held liable for investment choices derived from this article.
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