Absorption Rates 101: What They Are & Why They Matter

As seasoned real estate agents, we at The Harter Group believe it’s critical to give accurate and verifiable data to potential buyers and sellers for them to make the most informed financial decisions for their family. It’s part of our job to know everything there is to know about the market we’re in. We often get asked, “is it a buyer’s market,” or “is it a seller’s market,” but without knowing absorption rates, those questions are impossible to answer.

By definition, The absorption rates rate in real estate is the measure of supply vs. demand and can also tell us how quickly homes are selling in a specific market. are the rate homes sell over time, in a given area. Typically,Generally, an absorption rate percentage greater than 20% means that the market is leaning towards being seller friendly favors sellers, with increased demand that exceeds supply. In this type of market, there aren’t enough houses on the market for everyone who is looking to buy, and therefore this market will also see rising home prices. An absorption rate below 15% is a buyer’s market, where there is too much inventory and buyers have more negotiating power when writing offers, and anything between 15%-20% is considered a balanced market, where neither the buyer nor seller have the upper hand.

The absorption rate is a great way for sellers to manage expectations.  Here are some examples why:

1. When you know how long the average home in your area sits on the market, then you can plan your finances and the timing of your next purchase, if necessary.  No one wants to ever be in a situation where they must carry two mortgages.  
2. If you know approximately how long homes are sitting, then it can reduce any anxieties you might have over when your home will sell, and you can better prepare a strategic plan with your agent to offload your home.
3. The absorption rate is an excellent indicator to determine how well properties in your neighborhood are being represented.  Are homes in your neighborhood selling too fast or too slow in comparison with the rest of the market?  This could tell you a lot about whether properties in your neighborhood are overpriced or underpriced.

Like everything in real estate, the absorption rate is ever-changing, so it is recommended that you follow up with your real estate agent at least once a month to see if there have been any fluctuations to the absorption rate.

Having a real estate agent who fully understands the South Orange County market is critical to everyone involved. If you’re interested in working with a real estate team that knows everything there is to know about absorption rates, best practices, and getting your home sold, we’d love to hear from you. 

Call us today to learn how you can keep more equity when you sell! 949-412-2808

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