Coralville Real Estate: Knowing the absorption rate helps figure out trends in the market.
After posting my quarterly report at the beginning of the month I decided more information is better... 
Yesterday I posted the calculations I made to come up with the absorption rate for homes sold in Iowa City. Today it's Coralville's turn. If you've never heard the term absorption rate, let me just clarify that it is a mathematical calculation to help project how long it is likely to take for a home to sell in any given area.
Why should you care about the absorption rate? It will probably help you when it comes to making a buying or selling decision down the road. Knowing the absorption rate will give you an idea whether Coralville is currently in a buyers market, a sellers market or a balanced/transitional market. Sellers will find this really interesting as it's a great tool to help decide how to price a home before putting it on the market.
I'll start with a calculation of the absorption rate for single family homes / Zero Lots in Coralville the price range $100,000 - $300,000:
The first step is to determine the number of homes sold in the past 12 months and how many are currently on the market. 
There were 148 homes sold in the last year and there are currently 78 showing as active listings.
148/78 = 1.9 - That means the inventory of homes turned 1.9 times in the last 12 months.
Now we take the 12 months and divide it by 1.9 to come up with the absorption rate.
12/1.9 = 6.3 months = 192 days
The absorption rate of the Coralville market for a home in this price range is 6.3 months or 192 days.
So what kind of market do we have? 6 months is considered a balanced or transitional market. When the average time on market is less than 6 months it would be considered a sellers market and when homes are on the market for more than 6 months, then it's a buyers market.
That was data for single family homes. The condo market looks a little different and it seems when it comes to condos in Coralville we still have a buyers market. I looked at condos priced from $80,000 - $200,000.
There were 48 condos sold in this price range in the last year and 30 are showing as active.
48/30 = 1.6 - Inventory for condos in this price range turned 1.6 times in the last year.
12/1.6 = 7.5 months = 227 days.
The absorption rate of a condo in this price range in Coralville is 7.5 months or 227 days.
Now for a quick disclaimer: If you're thinking of selling your home in Coralville this data is time sensitive and needs to be looked at again whenever you decide to list your home. Also, I picked homes in popular price ranges to give you a general idea of trends. Especially when you're selling your home it makes more sense to do a targeted absorption rate analysis and that's something I do at the same time I prepare a comparative market analysis.
Here's my latest post for the absorption rate in North Liberty.
Iowa City Real Estate Market Update 3rd Quarter September 2009
Coralville Real Estate Market Update 3rd Quarter September2009
North Liberty Real Estate Market Update 3rd Quarter September 2009
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