How Absorption Rate is Figured - and WHY is It Important?
How come? Absorption rate is one of the best indicators of whether a local real estate market is a buyers' market, sellers' market, or just evenly balanced.
Here's why: absorption rate indicates how long it is likely to take to sell ALL the existing homes in a given market, assuming the rate of sales stays constant and no new listings are added to the pool.
Here's how it works: Take all the listings that are on the market in the target area, and divide by the number of listings that sold in the past month in that same area. This tells us how many months we could expect it to take to sell all the current inventory in an area, IF the rate of sale stays the same and no new listings are added. (Of course, in reality, other sellers do put their houses on the market, making things even more challenging!)
Here's an example: Assume there are 5 listings that sold in the past month in a particular area. There are currently 50 listings on the market. By dividing 50 by 5, we can see there is a 10 month inventory of listings. Your odds of selling:
* within 30 days = 10%
* within 3 months = 27.1%
* within 6 months = 46.86%
* within 9 months = 61.26%
* within 12 months = 71.76%
If you aren't within that top 10% EACH MONTH your home is on the market, your odds of selling are greatly reduced.
Contact me if you'd like more information on Absorption Rates or would like an Absorption Rate Study done for you home. If you are planning on selling your home, I highly recommend you get one. Going without could cost you valuable time and money!