Evaluating Absorption Rates Vs. Median Sold Prices for Lancaster PA Real Estate

Today I updated my sales databases for Lancaster County PA - I keep a running log of residential home prices, sales totals and other figures off the MLS. I was curious to dig into home prices in Lancaster County a bit more, and also wanted to see if I could spot any trends in pricing other than the generic "things are off a bit" analysis.

I combined the monthly absorption rate (total active home listings divided by sold homes that month) with the median sold prices from January 2007 to October 2011. Absorption rate is a widely-used yardstick for market health - the industry considers 5-7 months of inventory to be a "stable" market, or balanced between sellers and buyers. Below 5 months is a sellers market, and above 7 months is a buyers market.

Here's the chart:

You can see a couple of things:

1 - Lancaster county statistically hasn't been in a sellers market since the third quarter of 2007.

2 - The last month we saw a "stable" balanced market was July 2010 (homebuyer tax credit?).

3 - There is a fairly clear inverse relationship between median home prices and absorption rate. It's supply and demand of course... more homes to choose from, prices take a dip.

4 - We should see the absorption rate spike up again to 17 or 18 in the next few months.

5 - Median sold prices have fluctuated since 2007 but overal remain in the mid $160's.

More fun with numbers!