The real estate market is continuing to show signs of improvement after a consistent two-month drop in the absorption rate. The absorption rate is the ratio between active and solds: the time it would take at the current rate of sale for the inventory to be completely sold. For example, if there are 10,000 homes for sale in a region, and 1,000 are sold each month, the absorption rate would be 10.

At the end of April, the absorption rate for the valley was down to 5.5 – a few years ago, it wasn’t uncommon for a home in the Phoenix-metropolitan area to sit on the market for 25-30 months. Anything below an absorption rate of 6 is considered a seller’s market. At present, the absorption rate is down to an astonishing 4.3.

There are currently 40,034 homes for sale on the real estate market – in the beginning of April, there were 50,000 homes for sale. That is a 20 percent drop in inventory in just two months. The number of homes for sale is expected to drop below 40,000 by the end of the month. There are 13,669 pending sales expected to close in the next 30 days. During the month of May, 9,351 homes were sold – in April, 8,527 homes were sold (April 1-24). In short, there were 824 more homes sold and 2,432 fewer homes for sale in May than there were in April.

May was also a good month for Tempe. In Tempe, the absorption rate is now 6.6 – not even a month ago, the absorption rate was hovering at a 10 or 11 month absorption rate. The number of homes for sale in Tempe is 131, bringing the inventory of available homes down to 876.

Investors are still continuing to snatch up foreclosures – they are buying foreclosures at a faster rate than they are hitting the market. The absorption rate for foreclosures is less than 1.0. In the last month, 5,939 foreclosures were sold, leaving only 5,472 on the market. If you want to buy a home, don’t be discouraged – there are still plenty of homes and foreclosures out there. Just know that there is a strong chance that you will be competing against multiple offers.

Steady home sales could be positive signal (CNN Money)

More Americans Consider Buying Foreclose Homes (MarketWatch)

Realty Times Market Conditions: Arizona (Realty Times)