How Fast Will My Home Sale?
Understanding Absorption Rates
Hello Informed Buyers and Sellers! Welcome back to my Fort Leonard Wood Market Analysis Blog. If you haven't been following my first blogs, it is time to "Catch Up". Blog viewers have gotten a wealth of information that prepares them with knowledge when they meet their Real Estate Professional. In this blog I wanted to discuss Absorption Rates to help you determine if Fort Leonard Wood is a "SELLERS" or "BUYERS" market.
What is an Absorption Rate? (Definition from Investopedia): An absorption rate is the rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market.
Other Factors to Consider!
Remember that absorption rates do not take into account new listings coming on the Fort Leonard Wood market. In essence it is a point in time. The end number below assumes no more sellers will put their home on the market until all others have sold "and" no additional buyers will enter the market to purchase. Those two factors are not a constant so that is why we use averages. What the absorption rate will tell the Buyer and Seller is:
a. Sellers’ Market: a high absorption rate may indicate that the number of homes available for sale will go quickly. This reduces the amount of time it will take to sell your home.
b. Buyers’ Market: a low absorption rate means just the opposite and sellers may negotiate more to get their home sold quicker.
My experience tells me that an absorption rate above 20% would be considered a seller's market and an absorption rate below 15% is considered a buyers’ market because it takes longer to sell your home. The chart below shows it will take 14 months to sell all the homes currently on the market which gives us a 7% absorption rate - "A Buyer's Market".
Absorption Rates for Fort Leonard Wood: I took the number of homes that sold in the Fort Leonard Wood Market from Sep 2015 to Sep 2016 (12 Months). I divided that number by 12 to get number of homes that sold per month (average sells per month). I then took the number of active listings for sale over the same time period. The average sales per month was divided into number of active listings to get how many months it would take to sale all of the homes in the Fort Leonard Wood Market (See "other factors to consider paragraph") The chart shows Fort Leonard Wood is in a buyer's market as of October 1, 2016 and it will take 14 months to sell all the homes currently on the market at the current absorption rate.
Absorption Rates - Fort Leonard Wood - Sep 15 - Sep 16
As your Realtor I use absorption rates to assist in pricing your home. We have to price your home in the current market so it does not sit for several months while other homes, that were priced correctly, sell first. Also, if the absorption rates increase, I can price your home higher and I can price your home higher. Home builders and investors can use absorption rates to decide when to start building new homes or invest in the local community.
Contact Me: If you have any questions or want to know what your home will bring in this market contact me via email at firstname.lastname@example.org or you may call or text me any time at 573.528.7642. Browse my website at www.leonardwoodhomes.com to see "all" homes on the market that your home would compete with.