What is Absorpion Rate?

Sellers take Heed!

In previous articles we talked about the importance of pricing a home correctly for the market. Pricing your home at less than market value can obviously cost you money, but you may sell quicker depending on the price range of the home. Pricing your home at more than market value can cause a home to sit on the market unnecessarily long.  This can not only cost you valuable marketing time, but buyers are wary of and will pay less for a home that has sat on the market for an extended period. So pricing your home correctly is obviously important and requires the skills of a professional. Besides price, though, there is another critical element to consider in marketing a home for sale. That is something called absorption rate and it is crucial in establishing the likelihood of a home selling in a reasonable period of time. 

It’s a fact that there are only a certain number of houses that will sell in any market in any given period of time based on the number of available buyers. That is basic supply and demand. The absorption rate refers to the number of homes in a given price range that will be sold or “absorbed” into the market during a particular time period. For example, say there are 21 single family homes that have sold during the past 3 months in Nashua between the price range of $300,000 and $350,000.  This means that the market will absorb on average 7 homes per month. Now, suppose there are currently 63 single family homes for sale between $300,000 and $350,000. By dividing the number of active listings in this price range by the average number of homes that sell each month in this price range we can determine the absorption rate, or the number of months it will take to absorb each of those 63 homes for sale into the market place. In this example, the amount of time is nine months. According to industry experts, any amount over six months indicates a buyers market. Less than six months is a seller’s market.

What if you don’t have nine months to sell your home? Talk to your RE/MAX Properties agent who can not only determine the absorption rate for your specific home but can create an aggressive marketing program based on your individual time requirements.