Good News: The "Absorption Rate" is shrinking!
Wait! What is "Absorption Rate", why is it shrinking and why is that good news?
For example, some time in 2008, the absorption rate for Sebring, Florida was way over 24 months. This meant that at the time it would take over 24 months for all the homes listed for sale to be sold if no new listings entered the market. Basically, the Absorption shows us how fast homes are selling in our Highlands County Market. It helps us understand the market as a whole and identify trends.
Now for the last 12 months, Sebring's Absorption Rate has decreased steadily from 18.7 in April 2009 to 11.1 in April 2010 and that is great news! Why? The more homes we have lingering on the market, the longer it will take to sell them. The main reason for the Absorption Rate to decrease is pricing! Overpriced homes sit on the market because buyers are looking at value first. You wouldn't buy a brand new BMW for $50,000 if you could get the very same vehicle for $40,000 from a different dealer across the street, right?
In previous years, buyers had a lot of leverage because the inventory available was huge. If one seller didn't want to accept an offer at market value, then the buyers didn't have much trouble finding one that would. Now that the inventory is shrinking and approaching more reasonable levels, buyers have less to chose from and therefore less leverage.
Here is an overview of the absorption rate in Sebring over the last 12 months:
April 2009: 18.7
May 2009: 18.4
June 2009: 17.2
July 2009: 16.4
August 2009: 15.15
September 2009: 14.1
October 2009: 14.7
November 2009: 14.55
December 2009: 14.4
January 2010: 12.7
February 2010: 12.5
March 2010: 11.1
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