It's not a new term or a new statistic. In fact, it's something I discuss in my everyday conversations with other agents as well as my well-informed clients who have a solid understanding of the Edmond Real Estate market. I'm sure many of my peers here keep an eye on their local absorption rates, as I do. It helps me have a better understanding of current, and sometimes, coming trends in our area. The best definition I know for the term "absorption rate" is the rate at which properties are able to be sold in a given area. Basically, if you want to project how long it will take for all the homes currently on the market in your area to sell, just divide the number of homes on the market by the number of homes closed last month. For example, here in the Oklahoma City Metro area there were 1,762 homes closed in March, 2007. As of March 31, 2007, there were 8,491 homes listed in the same area. Divide 8,491 by 1,762 and you have a 4.82 month supply of homes. Pretty basic stuff I know, but it's good to keep an eye on this figure. When you see it rapidly increasing, you might be in trouble. When you see it decreasing, your market is taking a turn to the seller's side. One thing I've never really put much thought into though, is using these figures in my listing presentations. Until now. Let me refer you to an article I recently found through a simple Google search. That's a little different twist on narrowing down the absorption rate to a particular price point that I'd never considered before.
I don't know about you, but I'm always looking for a better way to explain to Mr Joe Seller why we should list his home for X, instead of his figure, X + 20%. This seems like an interesting way to demonstrate the damage that a high listing price can do to his chances of a successful sale. So, I'm curious, how many of you out there already use this in your listing presentations?