Real Estate absorption rates are an indication of how long it would take, at the previous month's pace, for a market to sell off its entire inventory. To calculate this number in weeks, you would apply the following formula: Active Listings / ( (Last Month's Sold * 12) / 52 ). This value helps us gain a better understanding of the market in which we are dealing:
- Are we in a buyers or sellers market?
- How are 3 bedroom homes selling in the Palos Verdes neighborhood versus the Saranap neighborhood?
- What impact will we have if we price a home at $605k versus $599?
- If I want the best chance at negotiating a below asking price offer, should I look in Walnut Creek or Pleasant Hill?
Absorption rates can, and should, be calculated in a number of ways depending on your interest. At a very high level, you can look at the national, state and county numbers; however, these won't help you buy or sell a specific property. When you are dealing at the property level, it is important to look at these numbers across price boundaries, property characteristics and local areas. In the table below, I give you the absorption rates for Walnut Creek across some high level price boundaries. Since December is historically a very slow month, I provide the rate based off of the December sold numbers as well as the 2007 average sold numbers.
| |
Under $500k |
$500k - $999k |
$1M - $1.499k |
$1.5M - $1.999M |
Above $2M |
| December |
37 Weeks |
28.6 Weeks |
39 Weeks |
43.3 Weeks |
8.6 Weeks |
| 2007 Avg |
24.8 Weeks |
20.1 Weeks |
20.3 Weeks |
26 Weeks |
16 Weeks |
I've highlighted the $2M numbers because there really aren't enough data points in this range to determine a very accurate absorption rate.If you are buying or selling property, you owe it to yourself to know the absorption rates at a granular level.
If you are interested in any location within Contra Costa County and don't have access to the necessary data to calculate this number yourself, feel free to give me a call and I'd be happy run the calculations.
