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What is the “Absorption Rate”?

Reblogger
Real Estate Agent with Long & Foster Real Estate, Inc., Annapolis MD 21403 DRE# 319853

No matter where you live absorption rates are a huge componet of buying or selling real estate. Myrl has given a beautiful explanation of just what absorption rates truly mean. 

Original content by Myrl Jeffcoat

 

 

It’s not often that I am asked the question, “What is the real estate ‘absorption’ rate?”  But, occasionally the question will arise.

 

The question is one sometimes asked by folks interested in buying or selling real estate; or for those simply interested in current market condition.  The term, “real estate absorption rate” is used to help predict the housing market. 

 

The general public sometimes hears the label used via the media, but they don’t often have the data to translate it into meaningful information.  The real estate absorption rate helps the public more accurately determine whether it is a buyer’s or seller’s housing market.


 

In a “Normal Market” the absorption rate is between 5 and 6 months.  In a “Buyers Market” the absorption rate is higher (7+ months).  But in a “Sellers Market” the absorption rate is lower (1-4 months).

 

A clearer definition of real estate absorption rate is to ascertain the number of months it will take to sell all homes currently on the market.  If the inventory of homes presently on the market is a 12 month supply, it would mean at the current rate of sales, the market would need 12 months to clear the inventory, IF no additional homes came on to the market.

 

Being aware of the real estate absorption rate assists in creating perspective for homebuyers and sellers.  It educates sellers so they can have realistic expectations about pricing their home for the market.  By being competitive in price, they improve their odds of having their home sell quickly.  Sometimes while making an offers on homes, buyers will use the absorption rate to obtain a lower price during negotiation.

 

It should be remembered however, that outside influences may dramatically affect the predictability of real estate absorption rate.  For example, government policies and programs can either stimulate or wither the marketplace.   An improved job market would have a significantly positive effect on the economy, which could spur buying and quickly clear out housing inventory and change the absorption rate picture. 

It is important that serious homebuyers and sellers understand their local real estate market, and trends for their area, in order to make informed decisions regarding their real estate need
s.

 



Real Living Great West Real Estate
(916) 635-0420
http://www.myrljeffcoat.com

 

 

Posted by
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About the Author Martha Brown- As a third generation Annapolitan I love to write about my experiences in and out of the real estate market. Licensed since 1992 all with Long & Foster I am a Certified Residential Specialist (CRS) and a Seller Representation Specialist (SRS) whose passion is homes in the Annapolis MD area and surrounding communities. My goal is to help my clients understand the real estate market and to then make sound real estate decisions. 

 

Martha can be reached  at 410-260-2800 ofc or 

martha@homesaroundannapolis.com.

When searching for Annapolis area homes for sale

there is no better place than

www.HomesAroundAnnapolis.com

 

Have a real estate question?? 

 Ask Martha

 

 
         Bringing 'Peace of Mind' since 1992                  
 
All Photographs and/or written material and content produced by Martha Brown. All Rights Reserved and may not be reproduced or reprinted without express written permission of

Martha Brown of Long & Foster Real Estate.

320 Sixth Street

Annapolis, MD 21403

410-260-2800 office

410-440-7839 cell/text  

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Comments (4)

Brint Wahlberg
Windermere Real Estate - Missoula, MT
The Wahlberg Team

Great write-up, I've begun using absorption rates 2 years ago and it gives a much better perspective on the market especially when the only other alternative is DOM for sold properties.

Jan 08, 2012 12:31 PM
Jimmy Phan
KELLER WILLIAMS REALTY IN MOORESVILLES, NC - Hickory, NC
Phan real estate group in hickory

Hi Martha

a very useful informative and educational blog.

thanks for sharing

onward

jimmy phan

Jan 08, 2012 12:32 PM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

This post is a great tool to assist our sellers and buyers in understanding absorption rates!

Jan 08, 2012 01:14 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Martha - Thank you so much for the reblog.  It is greatly appreciated.  I am hopeful this article will help explain absorption rate to home buyers and sellers.

Jan 09, 2012 12:12 PM