The Absorption Rate of a market measures what the rate of sale is for properties in the area. The formula for calculating the rate is quite simple
# Of Active Listings / Pending Sales In Last 30 Days = Absorption Rate
As of Monday 11/01/10 there were 108 active listings in Nether Providence, and 10 pending sales (under contract) within the last 30 days, therefore:
108/10 = 10.8
So as of Monday 11/01/10 there was a 10.8 month supply of homes in the area. It would take almost 11 months to sell through the existing inventory of homes, for the purpose of the calculation it is assumed that no new listings come onto the market.
Snapshots of the Absorption Rate over the year:
February – 7.6
April – 5.5
August – 13.4
The April low was due in large part to the Homebuyers Tax Credit, after the credit expired the rate has climbed, in August it reached it’s peak.
An Absorption Rate of 6.0 would signal a neutral market – buyers and sellers are equal, a rate below 6.0 signals a seller’s market, a rate above 6.0 signals a buyer’s market.
The Absorption Rate is one of the many variables that should be considered when determining the listing price of a home as well as determining an offer price for a home.
