Market absorption rate is a good way to get a feel for how hot the real estate market is in your area. Absorption rate basically represents the time it would take to sell all the existing inventory of homes in a certain market at the rate they currently are selling, if no additional properties came on the market in the mean time.
Richard Dolbeare recently created a great blog post that visually demonstrated absorption rate in his Hawaii market with a color-coded chart that really grabbed me as a way of showing very graphically what is goin on in a given market.
Using his tip, I've created a graphic presentation of what is currently going on with the market in some of our Albuquerque horse-friendly areas, by analyzing the current absorption rates in Albuquerque's North Valley areas, Corrales, and Placitas. The figures are all based on data from the Southwest Multiple Listing Service, for single family, detached residential properties currently on the market, and closed withing the past 30 days, as of July 8, 2007.
The color coding above shows much of a buyer's or seller's market an area is in, based on absorption rates. The cooler the color, the more of a sellers' market; the warmer the color, the more of a buyer's market exists.
So, here is the data for Corrales and Placitas, New Mexico, plus Albuquerque's several North Valley areas:
You'll notice that the North Valley and Far North Valley area are within the green band, comfortably in the "Seller's Market" ranges, with absorption rates of 5.8 months and 6 months, respectively.
The West River Valley is not too far off that standard, with an absorption rate of 7 months, puttin it into the lower part of the "balanced market" range. The Near North Valley is just out of that comfort zone, with an absorption rate of just over 10 months.
Corrales, however, is in a much more difficult market, with a 17-month absorption rate, well into the "Buyers' Market" range, and Placitas is in fairly dire straits, with a current absorption rate of 32 months. At the current sales rate, it would take nearly three years to close all the Placitas listings currently on the market, even if no other new listings were offered for sale during that time period. This makes it especially important for sellers in Placitas to make sure their properties are well-priced, perfectly staged, and well-marketed!
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