Brevard market starting to equalize.

The term "equalization," as it relates to real estate, may be a new one to you.

I believe this is a process that is just beginning to take place in the real estate community throughout Brevard County. Our market has been extremely volatile. Our prices were sky-high in 2005, dropped in 2006, and fell even lower in 2007.

Where are we going in 2008?

In my professional opinion, as a broker, we are at the point of the beginning of "equalization."
Every office has seen offers lower than one-half the list price of a home. A seller, who needed to sell, may have dropped his or her price to a midrange from the initial offer and sold.

Those sales all are a matter of public record, and one has access to this information through the Brevard County Property Appraiser's Web site. In the past, when a seller saw the recorded sale or heard of the low sale price, if one were smart, he or she did one of two things: Removed the home from the market or dropped the price to compete for the buyers in the market. At this time, the majority of listings are beginning to be priced competitively -- that is, sellers have begun to realize they must price their home with today's prices, not those of years' past.

A buyer can easily see competitive homes in the area, which may still be overpriced. It also should be apparent to a buyer which homes may be priced "right." At this point, the buyers in the market have heard of the low prices that sellers were accepting, but the buyers may not be in tune with a slight change in the market.

The process of equalization or a market correction is beginning to take place. Many of the low-priced offers are not receiving low counteroffers because the sellers have reduced the prices to within the correct range of value. This may not be true of all homes, because there always will be sellers who will sell for a lower price if they are in distress.

Perspective buyers may search the Web, and find that sellers have negotiated a great deal off of the list price in the past -- up to a 25 percent to 35 percent reduction. But, as we look into the homes going under contract today, some contract prices are beginning to come closer to the list price.

The remaining "steals" are being absorbed. This is the correction.

Sellers have found that, if they needed to sell, they had to move down, because the market has forced them to do so because of the oversupply. It took awhile for sellers to realize how low the market had spiraled. Now, it is time for buyers to realize they might miss out on the house they like because it may not go any lower. With the interest rates low and the portability of homestead, we probably have reached the point of equalization.

After this point, the market then begins to stabilize -- that is, there is a "balance" in the real estate market.

I use two methods to determine if there is a change in the real estate market:

The first is the ratio of recent sold prices, compared with the list price of a property. The closer the sale price is to the list price, the closer we are to a balanced market.

The second method is the absorption rate. The absorption rate is determined by taking the active listings in an area, and comparing them with the number of sold properties within the past two to three months.

If there are 20 listings currently in your neighborhood, and five have sold in the past three months, then it will take an estimated 12 months to absorb the remaining listings, provided there are similar numbers of buyers in the next few months as there were in the past. If the activity level continues to increase, then the time or absorption rate decreases. My research in most neighborhoods in 2007 indicated an absorption rate of 12 months to two years in many areas.

In some areas, the absorption rate was projected to be as long as four years. Last week, my research for a particular neighborhood indicated a four-month absorption rate -- one positive sign of a changing market.