Real Estate Blog - MARKET ABSORPTION RATE

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MARKET ABSORPTION RATE - The EASY Way

I know it's been done before but I want to share the formula I use because it
seems easier than some others I've come across.

INVENTORY

The total number of houses for sale within a defined market area

ABSORPTION RATE

The rate at which homes will sell within a given period of time or unit sales per month

EXAMPLE

48 sales in 6 months ~ divide the # sales by the # months = 8 sales per month

MONTHS OF INVENTORY

Time required to sell all existing homes ~ divide inventory by absorption rate (# sales per month)

EXAMPLE

88 houses in current inventory divided by 8 sales per month = 11 months of inventory

If you find this formula useful, feel free to pass it along :-)

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Posted by Gail MacMillan - CRS, e-PRO, GRI ~ Titusville FL Real Estate Brevard County on 01/13/2008 02:34 PM

Comments (12)

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Originally posted at: My Titusville FL Real Estate Blog: MARKET ABSORPTION RATE - The EASY Way

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12 Comments on MARKET ABSORPTION RATE - The EASY Way

JAN

2008

Thanks Gail. You make it sound so easy. Good info.

Gail, I'm glad you put the formula in your blog because as simple a concept as this is, so many agents don't get it. I include the explanation in my listing presentation.

JAN

2008

Gail- Thank you this looks pretty easy, but even easy things are hard if you never did them before :)

You're all welcome - good tool to use on listing appointments to help the sellers see the reality of the market. Right now we need all the tools we can muster.

True...now how about your Tablet....did you give up? That is a great tool, and it really is pretty easy to use it as intended :)

JAN

2008

Gail - A good formula doesn't have to be complicated. I use this same equation for market absorption rates and it works great.

JAN

2008

Thanks for making it seem so easy! This is a great listing tool, that's for sure. It sure puts everything in perspective for the sellers. Great post!

Ryan, Barb - Glad it works for you, hope it wins you a listing this month :-)

Kathy - The Gateway went back, I'll be shopping again as soon as I time to do more research. The Tablet is a scheduled purchase for this quarter, too bad the other didn't work out. Perhaps Dell has a better attitude, I'll check their Tablet out, seems a few on AR are very happy with theirs. It is more pricey though.

FEB

2008

Gail, Do you always use six months or does it make sense to use the past 12 months of sales to avoid seasonal fluctuations? For example, if I took the inventory from April, when there are always a lot of homes for sale and used the prior six months of sales (Oct-March). The absorption rate will always look worse than if I did it in October (April-September). Thanks.

Hi Gail- I had to think about your question. I don't think our market here in Florida experiences the same seasonal fluctuations as those in cold winter climes. I have not used this formula for periods of more than six months so I've not played with the numbers to record the outcome. Our inventory of single family homes has remained in the 7000-7600 range for about 2 years now (Brevard County). I do find the absorption rate varies with size and desirability of neighborhoods. I suppose if I did have a seasonal flux I might do 2 reports of 6 months each, then combine them for comparison purposes. If you play with the numbers and find they have a story to tell, would you mind sharing your findings with us. Thanks

APR

2008

Great presentation on this subject.

I use these statisticcs with both buyers and sellers.

Se my post at: http://activerain.com/blogs/jpeters

You are right, this was much easier to understand! Thanks!

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