Iowa City Real Estate Market Trends: Knowing the absorption rate helps figure out trends in the market.
After posting my quarterly report at the beginning of the month and being something of a data freak I've decided it's time to kick it up a notch and provide you even more data on our market. Today I researched the absorption rate for homes in Iowa City. If you've never heard the term absorption rate, let me just clarify that it is a mathematical calculation to help project how long it is likely to take for a home to sell in any given area.
Knowing the absorption rate will provide insight on whether an area is currently in a buyers market, a sellers market or a balanced/transitional market. This of course is really helpful to know for sellers as it's a great tool to help decide how to price a home before putting it on the market.
I'll start with a calculation of the absorption rate for single family homes / Zero Lots in Iowa City in the price range $100,000 - $300,000:
The first step is to determine the number of homes sold in the past 12 months and how many are currently on the market. There were 466 homes sold in the last year in this price range and there are currently 217 showing as active listings.
466/217 = 2.1 - That means the inventory of homes turned 2.1 times in the last 12 months.
Now we take the 12 months and divide it by 2.1 to come up with the absorption rate.
12/2.1 = 5.7 months = 171 days
The absorption rate for homes in this price range in Iowa City is 5.7 months or 171 days.
So what kind of market do we have? 6 months is considered a balanced or transitional market. When the average time on market is less than 6 months it would be considered a sellers market and when homes are on the market for more than 6 months, then it's a buyers market.
What we gain from this data is confirmation that Iowa City with 5.7 months is pretty balanced, perhaps trending towards a sellers market. Quite encouraging data for anyone thinking of selling a home in Iowa City right now. Buyers sitting on the fence on the other hand may want to consider making a move. Looks like we're trending away from the buyers market.
That was data for single family homes. The condo market looks a little different and it seems when it comes to condos in Iowa City we still have a buyers market.
I Looked at condos priced from $80,000 - $200,000
There were 214 condos sold in the last year and 157 are showing as active.
214/157 = 1.4 - Inventory for condos in this price range turned 1.4 times in the last year.
12/1.4 = 8.6 months = 258 days.
The absorption rate for condos in this price range on the Iowa City market is 8.6 months.
Now for a quick disclaimer: If you're thinking of selling a home in Iowa City, this data is time sensitive and needs to be looked at again whenever you decide to list your home. Also, I picked homes in popular price ranges to give you a general idea of trends. Especially when you're selling your home it makes more sense to do a targeted absorption rate analysis and that's something I do at the same time I prepare a comparative market analysis.
Here are links to posts for the absorption rate in Coralville and North Liberty.
Iowa City Real Estate Market Update 3rd Quarter September 2009
Coralville Real Estate Market Update 3rd Quarter September2009
North Liberty Real Estate Market Update 3rd Quarter September 2009
Comments(0)