Murrieta CA Single Family Home Absorption Rates - May 24, 2011.
Buying a house? Selling a house? Whether you’re a home buyer or a home seller, you may want to know whether it’s a buyer’s market, or a seller’s market.
In a buyer’s market, home buyers have the upper hand and can drive hard bargains for their dream home.
In a seller’s market, sellers have the advantage and can demand top dollar for their home.
It’s a SELLER’S MARKET currently for Murrieta Single Family Homes, as shown in the chart below:
Click here for info on Murrieta Home Prices.
ABSORPTION RATE
How can you determine whether it’s a buyer’s market or a seller’s market? By looking at housing market absorption rates.
The absorption rate refers to the number of months it will take to sell all the homes currently listed for sale. For example, if it will take six months to sell the current inventory of homes, then the absorption rate is six months.
When the absorption rate is less than five months, it’s considered a seller’s market. When the absorption rate is more than seven months, it’s a buyer’s market. And when the absorption rate is between five and seven months, it’s a balanced, or stable market.
CALCULATING ABSORPTION RATES
The absorption rate is calculated by dividing the number of homes for sale by the number of homes sold. For example, if the number of homes currently for sale is 350 and the number of homes sold on average per month is 100, then the absorption rate is 350 / 100 = 3.5 months.
ABSORPTION RATE TRENDS
By comparing the three, six, and twelve month values, the absorption rate’s trend is determined. If the three month absorption rate is higher than the six month rate, and the six month rate is higher than the 12 month rate, then the absorption rate is trending upward. But if the three month absorption rate is lower than the six month rate, and the six month rate is lower than the 12 month rate, then the absorption rate is trending downward.
Absorption rate trends help buyers and sellers determine a realistic value for the home. When absorption rates are trending upward, then homes are taking longer to sell, which puts downward pressure on housing prices. However, when absorption rates are trending downward, then homes are selling faster, which puts upward pressure on housing prices.
Note: The above Absorption Rate chart only shows the absorption rates for standard sales and REO (bank owned) sales, and excludes short sales. All data is courtesy of the California Regional MLS (Multiple Listing Service). The information provided is deemed reliable, but is not guaranteed.
Copyright ©2011 Bill Burchard
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