Real Estate Market Absorption Rates - A Great Way to Determine the Real Estate Market Trends
Every buyer or seller would like to know is it a buyer's or seller's market? No buyer wants to pay too much and no seller wants to leave money on the table by pricing too low. The answer is in knowing the Market Absorption Rates which we constantly monitoring
Property absorption rates in any local real estate market are usually considered the best indicators of whether that market is a sellers' market, a buyers' market, or balanced market.
Sellers' Market - Absorption Rates 1-4;
Neutral Market - Absorption Rates 5-6;
Buyers' Market - Absorption Rates greater than 7
The easy-to-understand process of calculating absorption rates for local markets will be helpful to anyone trying to figure out the current real estate cycle and how to formulate a winning buying or selling strategy.
For instance, assume there are currently 100 Single Family Homes for sale in a large, single family home community. Of these, 70 are priced at, or below, $545,000. Last month, assume that 5 homes sold for $545,000 or less. The absorption rate would then be 70 divided by 5 , or 14.0. An absorption rate of 14.0 indicates a strong buyer's market and that it will take 14 months to sell all the hypothetical 70 existing homes listed at or below $545,000.
This basic analysis can be used with most of property types including building lots, homes, condominiums, or even commercial properties.
Please call Richard and Olga if you would like to know Market Absorption Rate for your area.