A Key to Reading the Market
When it comes to real estate, one of the most useful tools for understanding market conditions is something called the absorption rate. Simply put, the absorption rate measures how quickly homes are selling in a specific market. It's calculated by dividing the number of homes sold in a given period by the number of homes currently on the market. This figure gives us a "speedometer" for the market�how fast or slow homes are moving. In a balanced market , the absorption rate usually reflects about five to six months of inventory. That means if no new homes were listed, it would take five to six months to sell all the homes currently available at the existing sales pace. When the absorption rate dips below five months, we enter seller's market conditions . This signals high demand and low inventory, which often leads to faster sales, competitive bidding, and multiple offers. On the other hand, when the absorption rate climbs above six months, it indicates...