It's been raining listings lately, at least in the Albuquerque area, which creates pretty poor absorption rates, leading to market saturation. It may sound like these terms must be referring to recent weather in Texas, but they really refer to very pertinent statistics for real estate buyers and sellers.

Take a look at the box at right. This is what is appearing right now, as I'm writing this post, on the Albuquerque Metropolitan Board of Realtors site. Look closely at that figure for Residential Listings: 6694. That may not seem like a really high number of homes on the market for some of you reading this, but it represents a record figure for the Albuquerque market.

What we really want to know is, how long will it take for these homes to actually sell? That's where absorption rate comes in. To calculate the absorption rate, we need to know how many homes sold in a month. So I researched it. In June, 2007, exactly 1137 residential listings closed. So, if 1137 listings sell in one month, how long will it take to sell all 6694 currently on the market if no other properties come on the market? To calculate this, we divide 6694 by 1137, and get 5.89. That's the number of months it should take, based on current rates of sale, to sell all 6694 residential listings IF no other properties came on the market in the meantime.

Almost 6 months. That's a fairly high absorption rate, but it could be worse. The conventional wisdom is that 3-4 months absorption rates indicate a sellers' market, 6 months indicates a fairly balanced market, and 9-12 months (or worse) is the sign of a true buyers' market. So a 5.89 month absorption rate is not so bad. But it feels worse to us because of a few things:

1. We're coming out of a really strong sellers' market. For instance,  in February, there were fewer than 3000 total residential listings on the market, while 907 sold in February, so the absorption rate at that time was in the 3 month range, not the 6 month range.
2. The figures above are overall residential home sales and listings throughout the Albuquerque MLS system. Individual areas and price ranges have differing results, with some areas and price ranges now well into the "buyers' market" ranges.

Last year, and in 2005 as well, few sellers were putting their properties on the market, so buyers were often indulging in bidding wars trying to obtain one of the relatively few properties available. Now, there are far more properties on the market than there are buyers looking to buy. Ergo, 6-month absorption rates rather than 3-month absorption rates. We're heading towards a saturated market, at a fairly rapid pace.

If you are considering listing your home, though, make sure you talk to prospective listing agents about the absorption rate for your specific neighborhood and price range; the figures may be significantly better or worse than those for the MLS as a whole!

The general figures do indicate that it is especially important for sellers to make sure that their homes are in top condition, well priced, nicely staged, and aggressively marketed by a competent agent.