Zan Monroe teaches real estate agents how to use absorption rate and months-of-supply data to price homes competitively. When supply hits six months or higher, buyer urgency drops and homes need to be priced at the "front of the store" to stand out. He walks through the math: homes sold per month, required contract timing for a 90-day move, and current national supply at 7.5 months.
How many homes sold in the last 12 months in your neighborhood? How many homes are selling every month? One. And if currently there are 10 homes on the market, how many months supply is there? 10 months. And when your house comes on the market, how many will there be? 11. Now you told me you needed to be in St. Louis in 90 days, right? Come on. So how would you like to position your house? The best value. The best value? To do what? Sell it. Well, yeah, see, now we need to start backing up from when you want to move. So if you say, oh, I got 3 months to sell, right, we can be under contract in 3 months. How long before you have to close? Another 30, 45 days. See, if you want to be moved in 90 days, you better be under contract in 60 days. You better be negotiating in 30 days with a live buyer. You with me? Mr. and Ms. Seller, if 12 homes sold in the last 12 months, how many on average are selling a month? And if currently there are 10 on the market, how many months supply is it? And if your house comes on the market, how many will there be? And how would you like to position your house? Sell first. Sell first. See what I just did? That took me completely out of responsibility of pricing this home. It's no longer my job. It's my job to give you enough information so that you can make the right decision. It's called absorption rate. Here's what we know. In talking to Dr. Lawrence Yun, the Chief Economist for the National Association of Realtors, we know that a 6-month supply is a balanced marketplace. We know that less than a 6-month supply means there's not enough houses to fill demand. If you go back in history, the highest point of absorption in the United States was about 13.5 months. This was back in the '70s. It coincided with interest rates in the, um, high teens, low 20s, 21s. Some of you were around to see all that. It was a scary time. There was a 13-month supply. The lowest time of inventory in the United States occurred between 2000 and 2005 where we hovered around about a 4.5-month supply nationwide. Currently we're sitting somewhere between 7 and 8, I'm going to say 7.5 months supply. We'll find out next week will be, or this week, today. Tomorrow I'm flying. Today I'm flying to Washington, D.C. We'll get the economic report from Dr. Yellen on Thursday of this week. I'll know exactly what we're looking at. Here's the deal. More than a 6-month supply means there's too much supply. And so, it takes all the urgency out of the marketplace. Doesn't mean that homes are devaluing. It simply means that buyers have way more to choose from. Let me ask you a basic question. Be careful how you answer it. Was it a great time to buy a house between the year 2000 and 2005? Maybe. Let's rephrase that because y'all aren't brave enough to answer the question. Was it a great time to buy a house between 2000 and 2005? No. No. It was a terrible time to buy a house because you were competing with other buyers, multiple offers, houses were getting bid up above the marketplace. How could we allow that to happen? We didn't. It's not our job to monitor the market. We— I mean, it's our job simply to monitor the market and advise our clients. And sellers were in the driver's seat. Let me ask you this: is today a great time to buy a piece of real estate? Yes. And yet nobody is buying. Why? Fear. Because this is a crisis. It's such a great thing not to waste. I've been searching for properties all year and I think I found 2 this week that I'm gonna get a hold of. If the price is right, I'm gonna buy them because everybody is turning loose in real estate. Gee, here's the problem: they've got way too many sellers to compete with. Now, your— how many of you have listings? Everybody in the room. How many of you have listings that aren't being sold? Well, why? Too much selection. Something else is getting bought. Now, are houses being bought in the Charlotte market? Yes, they are. Why aren't yours? Because they're not positioned in the front of the market. Think about Walmart. If they had too many tennis balls, where would they put them to sell quickly? The front of the store. I want you to price your inventory in the front of the store, in the front of the market. So that the consumer who comes in goes, "Whoa, we got to have this house now," before we even look at anything else. Let's go on. I'm going to briefly talk to you about how you calculate
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