Our market’s absorption rate tells you whether conditions favor buyers or seller. Here’s how.
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Nothing affects the value of your home or the real estate market at large nearly as much as the absorption rate. What is the absorption rate, though? How does it work?
The absorption rate determines whether inventory favors buyers or sellers. It is calculated by taking the number of homes for sale in our market and dividing it by the number of homes that are sold each month.
For example, if there were 1,500 homes for sale in our market and we were averaging 500 sales per month, the absorption rate would be three months (which, by the way, it currently is).
Often, we categorize properties into different price ranges, and we see a direct relationship between the average days on market and the list-to-sale ratio. Typically, the lower the inventory, the more the market favors sellers. The higher the inventory, the more the market favors buyers.
When the market’s absorption rate is six months, it is considered a neutral market, meaning it favors neither buyers nor sellers.
Nothing affects the value of your home or the real estate market at large nearly as much as the absorption rate.
Remember—when determining your home’s value, it is important to examine recent data, otherwise you will be comparing outdated numbers to your property and missing out on an accurate estimate.
If you have any more questions about the absorption rate and how it affects our market or re thinking of buying or selling a home, please feel free to reach out to us. We would be glad to help you.