Albuquerque's latest real estate absorption rates indicate home sellers here in New Mexico really need to get real about the real estate market.

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 marketmarket, 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!)

So, now that we're clear on what absorption rate is, it's pretty obvious that higher the absorption rate, the worse the news is for sellers!

 The chart shows the absorption rates for single-family homes in various Albuquerque areas as of October 28th, 2007.

You'll see at a glance that no areas in Albuquerque are currently in the "cool blue" range of under 3 months absorption rate. Only three areas, Academy West, uptown, and Pajarito are in the comfortable "green zone" of 3-6 months absorption rate. Quite a few areas still fall into the "balanced" situation of a 6-9 month absorption rate, but all too many are currently sitting in the "hot seat." Some, like North Albuquerque Acres, Downtown, the West River Valley, and the Northwest Heights, are approaching a 2-year absorption rate, which indicates a strong buyers' market beginning in these areas.

The figures are even more significant when compared with the situation just a few short months ago. I ran the same study last July, and found that most Albuquerque markets were in a pretty strong situation for sellers. Below is the graph from July, 2007.

Notice that last summer, the vast majority of Albuquerque areas were in the "cool" blue and green zones, indicating a good market for sellers. Only two areas were into the red zones at all, and both were under the 18 months mark. Both these areas, Foothills North and Four Hills, have actually improved their absorption rates since July, nearly everything else has worsened.

What does all this mean for you? It means adjusting your marketing strategy ASAP, if you haven't already... but more on that in my next post. This one's already verging on War and Peace length, isn't it?