Data Driven Real Estate Decision Making
The most valuable tool for understanding the direction of the market is to study the relationship between inventory and value over time. The relationship is an inverse one:
- when inventory INCREASES value DECREASES
- when inventory DECREASES value INCREASES
The metric to measure supply (inventory) and demand is the absorption rate. The absorption rate is a measure of how long it would take to sell all of the homes currently on the market, based on how many homes sold in the past year. If the absorption rate increases this is an indication that inventory is increasing and that values have peaked. If the absorption rate decreases this indicates that demand is increasing and that values should increase further. Historically supply and demand in this market are balanced with a 6 month absorption rate.
Absorbption Rates: Cambridge and Somerville
The absorption rate in Cambridge and Somerville is less than one month. Current market conditions are strongly in favor of sellers. The lack of inventory and strong demand indicate that the market is in the midst of an appreciation cycle.

Median Values & Inventory: 2004 - 2014: Cambridge
This analysis of the past 10 years comparing inventory to median values clearly shows that as inventory has decreased values have increased.
Values are in thousands. Property types are single family, condo, and multifamily. All data from MLS PIN.

Median Values & Inventory: 2004 - 2014: Somerville
Somerville's inventory and median value trends are nearly identical to Cambridge.
Values are in thousands. Property types are single family, condo, and multifamily. All data from MLS PIN.
