Have you ever heard a REALTOR refer to an absorption rate? What is it and why is it important to buyers and sellers? An absorption rate is the ability of the real estate market to sell off all the existing inventory in a given market place. If the absorption rate is high, it means there is an abundance of inventory on the market. The more homes on the market, the more competition for sellers. As the absorption rate declines, less homes for buyers to preview and select.
If you have been listening to the national news, you may have heard that in many areas of the country the inventory is low. This means that sellers are choosing not to put their home on the market. Less inventory...a lower absorption rate. Buyers can either choose from the inventory on hand or wait until more homes come on the market. If a seller is priced competitively and if the home shows well, a seller can expect that the home will sell quickly and possibly see multiple offers. It is not unusual in this type of market for buyers to become very frustrated. Interest rates are a record lows; inventory is sparse and we are entering the Spring market!
What do REALTORS like to see? Most REALTORS like to see a balanced market. Just enough inventory to give buyers a good selection but not an over-supply where sellers begin to lose money.
Can one are of the country have a low absorption rate and another area of the country have a high absorption rate? The answer is absolutely! If an area is seeing development; new jobs coming to the area and people needing housing, the absorption rate will be low. If on the other hand, there are plant layoffs, perhaps a natural disaster which could affect housing then the absorption rate would be high. It would force residents to move to seek employment out of their area. They would have to put their home on the market and the inventory would probably sky-rocket. Hence, a very high absorption rate and very few buyers to bring it down.
If you are a buyer or seller, how does an absorption rate affect you? If you are a seller, it affects how you price your home and how you market it. If you area buyer, it affects how you bid on a home and your strategy for finding a home.
Please let me know if I can assist you with your real estate needs. I have been successfully selling homes for 24 years! 2013 promises to be an exciting year across the country.
Coldwell Banker Prime Properties
Serving the Capital Region of New York