Many people looking for real estate in the Naples, Bonita Springs and Estero areas, maybe unfamiliar with some real estate terms and their definitions that are used in the southwest Florida. Presented below are definitions of various terms to assist people in understanding the local real estate market and properties. In addition, the glossary contains real estate terminology used to describe statistical terms used to describe the current market conditions.
Absorption Rate – this can be expressed as either a percentage or number of months it will take to sell existing listed homes or condominiums, based upon the level of closed sales activity using a roll average over a specific period of time. For ease, the number of months of inventory (listings) is generally used. When the number of months of inventory is between 5.5 months and 6.4 months it represents a neutral market where the buyers and sellers are equal. When the number of months of inventory is 5.4 or less, it is a sellers’ market. A buyers’ market exists when the number of months exceeds 6.5 months. When expressed in a percentage the neutral market is 45% to 55%, a sellers’ market exists when the percentage is less than 45% and a buyers’ market when it exceeds 55%.
Using the laws of supply and demand when it is a sellers’ market the supply is low and demand is high, therefore, it is expected prices will increase. When it is a buyers’ market the supply is greater than the demand, therefore, it is expected prices will decline.
Adsorption rates can be national, as well as, reflect local real estate market conditions. Also, consideration must be given to both neighborhood and price range, as the resulting figures could present a different picture of market conditions.