The Conejo Valley area includes the cities of Thousand Oaks, Westlake Village, Agoura Hills, Oak Park and Newbury Park. Currently the Absorption Rate is 2.5 months. Yes, there is a limited inventory in our market area.
I met with an agent yesterday while I was showing one of my listings and while we were waiting for his client to arrive we were talking about the real estate market. I mentioned Absorption Rate and how it plays a part in my conversation when I am talking to Buyers and Sellers. Even though he has been selling real estate for a number of years he said he has never used this and quite frankly did not know what it means.
OK, so what is Absorption Rate? Simply put, it is the rate at which a market absorbs or eliminates inventory. Markets are always changing: new inventory is being added and old inventory is being sold or absorbed.
To calculate you enter the number of units sold in the last 12 months in your market or market subset, then enter the number of active listings for the same market or market subset. You may also use a shorter time period as long as you annualize the result. For example, you might use the last 3 months sales data multiplied by 4 to represent a full 12-month period.
Absorption rate helps you take that ever-changing market and bring it into a measurable snapshot that you can use to advise your Buyers and Sellers. Also, it is a great way to gauge the market and a very good conversation starter.
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