Loudoun is a Seller’s Market? Are You Crazy?!

People love to ask me, "How's the market?" and usually throw in a comment such as, "I've heard it's a total buyer's market". That was definitely the case in 2007 and most of 2008. But, sorry to burst your bubble, that's not necessarily the case anymore.

Just look at this example – this town house in Ashburn was priced correctly and sold around Thanksgiving of last year (a major holiday when real estate is "slow") for 98.6% of the list price (including seller closing cost assistance) within 19 days of being on the market. (And no, they didn't "give it away")

I don't blame you if you think I'm crazy. But I'm not pulling this out of my ___ so please keep reading…

"Buyer's", "Seller's" and "Balanced" Markets

There's a universally-accepted and used formula for determining whether it's a "buyer's", "seller's" or "balanced" market…

• more than 6 month's supply = buyer's market
• 5 to 6 month's supply = balanced market
• less than 5 month's supply = seller's market

The "month's supply" is determined by comparing the overall supply (active inventory) to the demand (homes going under contract/selling). So let's look at the supply and demand in Loudoun County.

Supply

• The real estate inventory in Loudoun County has been steadily declining since the beginning/middle of 2008. It currently stands at 1773 (including new construction)
• This is its lowest level since well before the market turned and tumbled

Demand

• 450 properties went under contract in January
• 316 have gone under contract so far this month (through 2/18)
• That's a current average of 15.6 properties that go under contract per day in Loudoun (aka 468 per month)

Month's Supply/Absorption Rate

• 1773 divided by 468 = 3.8 months

As you can see, according to the age-old, tried and tested supply-and-demand model, Loudoun County is technically a "seller's" market (and you thought I was crazy, didn't you?).

Now I know that there are a lot of other factors that play into what type of market it is such as availability of financing, interest rates, overall economic conditions, etc. But, the supply-and-demand formula has worked for years and in all the good and bad markets since these statistics started being tracked decades ago. The current economic conditions already weigh in to the amount of demand and the supply so this formula is still relevant and accurate today.

Does this mean that you can't negotiate as a buyer?

Not at all. It just means that you can't go into buying a home thinking that you're going to get a Ferrari for the price of a Honda because you won't. If you're going after the best deals around (like most buyers), be prepared to act quickly, compete against other offers and put your best foot forward or walk away.

Traditional sellers and banks and their listing agents/brokers look at statistics and numbers like this too - they know the current local market conditions are becoming more favorable for them. This is one reason why sellers/banks are getting tougher on price negotiations, as well as the type of financing they will and won't allow.

What about sellers?

Know your market value and competition well and price and market your property correctly. If you do these and other basic (though important) things, you'll sell for the most amount possible in a short period of time.

This may not seem right to you nor make sense when you look at the grand scheme of things or turn on the news. But it is what it is and we all have to play the cards we're dealt (and this isn't Spades or Blackjack so there's no cheating or card-counting).