Did you ever have one of those moments when you have so many thoughts going on in your head that you can't think?
Imagine what homeowners are going through when they make the decision to put their home or condo on the market to sell. The current condition of the real estate market, rising foreclosures, Mortgage Meltdown 2007, and the overall negative media coverage of everything, it's no wonder that home sellers in Palm Springs have so many questions.
When interviewing your potential Realtor, ask this question: "What is the absorption rate of homes in Palm Springs?" If they hesitate or cannot answer the question knowledgably, run. Any real estate professional "worth their salt" will know the answer to this question.
Absorption rate is a simple mathematical equation that demonstrates the basic concept of supply & demand in the real 
estate market. By taking the current number of homes on the market and dividing it by the amount of homes sold during the previous month, it will give a realistic look at how well homes are being "absorbed" by the market.
For example, there are currently 1493 homes on the market in Palm Springs. This includes all the active listings plus all the homes & condos in escrow. Last month, there were 74 homes sold in Palm Springs.
1493 divided by 74= 20.13 months absorption
Based on this rate of absorption, it would take over 20 months for sell all the homes in Palm Springs. Now this an overall calculation, and further research needs to be done for your particular situation.
Absorption Rates can be calculated by other criteria to give a true picture of the real estate market:
- Price Point: Some home prices may be selling faster than other prices in town.
- Neighborhood: Certain neighborhoods may be "more sought after" than others in town.
So what does absorption rate have to do with selling your home in Palm Springs? Everything.
Here's an example: You want to price your home at $825,000. The homes in the $600-$799k range has an absorption rate of 7.1, but the homes in the $800-$999k range have a rate of 12.3.
If you need to sell your home quickly, you may want to price your home below $800k. If you want your home stay on the market for over a year, then keep your price at $825,000.
Now is not the time to "test the market". If you need to sell your Palm Springs home or condo, you need to price it aggressively to be noticed. Your Realtor should be telling you the honest truth about the market, not what you want to hear in order to get an overpriced listing. What you don't know about the real estate market can hurt you financially.
I will be reporting the absorption rates of homes sold in Palm Springs on a monthly basis, starting in January. This way, home sellers & buyers will have an accurate picture of the real estate market.
photos courtesy of Flickr
Same article posted on Blog of the Desert
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