I taught a seminar tonight to sellers and buyers and we talked about absorption rates - what they were and why they were important to both buyers and sellers. We share how important it was to know the local market, not just the solds in the past 3 to 6 months, but also the competition and the absorption rate.
It's an easy calculation that will help in determining list price for sellers. Check to see how many active listings are currently in a certain price range and area (say 44) and then how many homes have sold in that same area and price range in the past 6 months or less (say 17). Divide the number of sold listings by the 6 month time period (17/6=2.83) to get the ratio number. Divide the number of currently Active listings by the ratio (44/2.83=15.55) and you get the number of months it will take for the market to absorb the number of homes currently listed. In this case it would take 1 year and 3 months.
That number helps sellers come into reality mode in an oversaturated market. Hope this helps!
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