A Brief Explanation of the Absorption Rate for a home.

Tuesday, December 23, 2014


Thank You again for having chosen Coldwell Banker and Ken Armstrong to serve you in the home selling experience.


It’s a great time to be selling because of the historically low interest rates out there, 3.75 %, is the rate I heard this morning for an FHA loan! This is good for the seller. It gives the seller more of the buyers money. When the rates go up home prices go down because buyers budget more of the money that is going to pay the intrest and less to the sellers.


I wanted to cover this week a brief explantion of what is Called the “Absorption Rate.”


OK, so what is Absorption Rate? Simply put, a market absorbs or eliminates inventory at the rate.


Every Month there is a limited supply of buyers for a home like yours. Every month so many homes similar to yours in your area sell.


1.   For example, if there are 100 condos listed for sale in a certain area, and 10 condos sold over the last month, the absorption rate is 10/100=10%. An absorption rate of 20% or higher means that homes are selling quickly and the market favors sellers.



Here is the problem, The Buyers buy what they feel are the very best deals. Then… every month new homes similar to yours in your area go on the market. The supply of homes for sale is bigger than the supply of buyers for the homes in your area. Your competitors keep lowering their prices to ensure they sell and you do not. There is always someone desperate or more motivated to sell. Alternatively, they just have lower expectations when it comes to price.


You need to get in the position to be the next one to sell. In a sense, get to the head of the line. The price you choose to list at puts you at the head or the end of the line. The ones at the end of the line never move to the front because new listings cut into the line ahead of you by pricing more competitively.

If the number that sells in a given period of let’s say, one month is three. Then we know that the next month 3 will sell and it will be the first, second, and third best priced ones.

To get to the head of the line you always need to be in one of those slots.

It is actually somewhat scientific and market driven. Unfortunatly no number of Open Houses, Print Ad, or websites can change the fact the market is price driven. This is the most amount a buyer will pay.

I hope this was helpful and we are working hard to sell your home right thru the holidays.



Thank You



Kenneth Armstrong                   www.kennetharmstrong.com

Coldwell Banker Prime              315-264-3082


Ken Armstrong

Ken Armstrong

Licensed Real Estate Salesperson
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