IS IT A BUYER OR SELLER’S MARKET?
Imagine that you had a job transfer and knew you were going to have to move out of the area within the next year. Would you ponder to yourself “should I sell my home now or later”? More than likely you would say “yes”. Maybe knowing what type of market you are in will help your decision. To know if it a buyer or seller’s market, you would want to know the area’s absorption rate.
The 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.
Since Realtors don’t have a crystal ball (and always be leery of the ones who think they do), we can only use the factual information to give us a guideline of expectations from recent results. In this case I will be using the FCAR MLS to give us a rough but fairly accurate idea of the absorption rate.
Please keep in mind that the average (neither buyer nor seller’s market) absorption rate is 6.0. The further the percentage drops under 6.0 the stronger it is a seller’s market and vice versa over 6.0 a buyer’s market. **Homes sold in next chart were sold between 4/1/2016 – 6/30/2016**
AREA Active Homes # Sold (Avg.) Absorption Rate
PALM COAST 503 327 (109) 503/109= 4.6
FLAGLER BEACH 49 14 (4.66) 49/4.66= 10.5
** Please note this is a broad range of homes and absorption rates can be a lot more detailed to very specific home types. Please contact me to discuss and find out the specific absorption rate that fits your home or Real Estate needs **
Since the average absorption rate is 6.0 and the Palm Coast absorption rate is currently 4.6 we now know Palm Coast is more of a seller’s market. Flagler Beach’s current absorption rate is 10.5 thus is a strong buyer’s market. So, why is this absorption rate number important?
· This figure shows how many months it will take to deplete the current available inventory for the specific range of homes you calculated. (Does not account for additional homes that hit the market).
· How much competition you are up against with specified property, and hopefully a selling guideline with time. (Remember… no realtor has a crystal ball so this figure can only guide you).
· It can indicate an idea of supply and demand. This can be a helpful guide to agents when it comes to evaluating the listing price of a home.
· Can give an idea for builders to build and also buyers to possibly consider buying a new home. When the housing supply is low and demand is high (low absorption rate), building can be a viable economical route of purchasing a home.
There many advantages of knowing the absorption rate along with all the other endless concepts of Real Estate. Now you know the gist of an absorption rate and have a tool to compare apples to apples.
If you have any questions, or would like to know the absorption rate to your property, please let me know. You can contact me at the following: