The Sold to List Ratio is the best attempt we have to monitor how the dance is going.
We have sellers that are lost and don’t understand why their house isn’t selling and we have others who have received multiple offers just last week. How can this exist in the same market and timeframe? Nuance. My attempt at this month’s article is to highlight some of the nuances in the current market primarily through heavily relying on the numbers. We may all have an opinion, but the numbers don’t lie.
What Does Median Price Actually Mean?
The median price point of the Flagstaff MLS in May 2024 was $620,000 and the median price point then this last May 2025 was $744,740. At a quick glance, one may interpret that data to believe that the average house is $100K more expensive this year vs. last year. However, if we graphically represent the sold data, you can see that the median is very much influenced by far lower priced sales occurring in 2024.
The rate lock effect (folks with sub-4% rates staying in homes longer), available inventory and continued prevalence of cash buyers at higher price points are all factors that could contribute to a higher median price point this year vs. last year. However, it doesn’t mean that appreciation is still a 2020-2022 rocket ship.
This is especially important for potential sellers to understand. Available supply and market demand can shift significantly depending on exact market timing and price tiers. This may be an interesting phenomenon to watch in the coming years: where median price point continues to increase while general market prices remain flat or have moderate appreciation.
Why would something like this happen? The higher end of the market ironically is a heavier cash purchase than financing so with less rate sensitivity, we’re seeing more seven-figure homes in Flagstaff selling than ever before, dragging that median up while not being a real representation of the general market.
Absorption Rate
One of the best indicators of the supply and demand trend is the Absorption Rate, measured in months. According to the National Association of Realtors, this indicates how long it would take to sell all current listings in a specific market at the current sales pace. It’s calculated by dividing the number of active listings by the number of homes sold in a given period (usually 12 months).
Most experts consider five to six months of inventory a balanced market, with equal buyer and seller footing. Anything less than five months is considered more seller biased and the lower the months of inventory, the more biased to sellers – and vice versa, having more than five or six months of inventory is more biased toward buyers.
Two charts shown here compare this last year’s absorption rate to June 2008 through May 2009. While the seasonality of the market appears to have a similar curve, the months of inventory are drastically different. The 15 months of inventory in May 2009 is a completely different market than the approximate 4.2 months of inventory in the current market. It would be important to note that this is the highest level of inventory we’ve seen since late 2019.
The poison pill of extremely low rates in 2020-2022 caused the buying frenzy that had some months as low as only one month of inventory. “Those are the conditions that align with bidding over ask, 5-10% increase in cash transactions and a rapidly accelerating home appreciation. With both extremes of inventory experienced in the last two decades, it’s hard to believe we could settle into “normal,” but it appears that’s exactly what the market is doing, at least for now. We have as balanced a market as we’ve been for more than five years and that is a very good thing that Absorption Rate helps verify!
Sold To List Ratio
Free market supply and demand is a dance and right now we’re in the elementary-school-style standoff but trying to figure it out. I hope you can take a moment and get a good chuckle out of that analogy. We were all there, right – the awkward pre-teen moments where the boys didn’t quite have enough courage to ask and the girls stuck together in intimidating packs. Well, the age-old adage is that fair market value is what a buyer is willing to pay and a seller is willing to accept.
The Sold to List Ratio is the best attempt we have to monitor how the dance is going. It’s somewhat imperfect as it doesn’t account for all negotiation factors like repairs and other monetary concessions, but it paints a decent picture. Red bars showing then the sold to list price based on any price reductions and blue bar showing the sold to original list price. As before, I’ve included last year’s graph with the June 2008 through May 2009 graph.
What I believe the numbers show is that our market is maturing to the music much more rapidly than in the historic chart. With original list price trends mirroring very close in current market, it shows me that our real estate professionals and their clients are truly doing their best to follow the pulse and to get a buyer and seller on the dance floor.
This doesn’t mean sellers have to give away the farm or that buyers need to come in guns blazing. This simply means that we’re moving tightly to amicable match ups. The historic chart simply adds to the clarity on why the absorption rate could get so high. If we start worlds apart, it’s going to take even more time for reality to set in and egos to simmer.
What Do All The Numbers Add Up To?
The one chart I don’t have is what the next 12 months on all these numbers will be. I’ll let you know once it magically appears to me some day – but until then, I believe the big picture and comparison to the extremes, give context. Barring any complete black swan event, we may just be headed toward a calmer balanced market that lets wages catch up to needed affordability levels and helps us get to a “housing for all” opportunistic market – one can hope! FBN
By Chris Hallows
For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte 66 Suite A-3.
Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff.
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