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An Absorbing Real Estate Trend

David Bartels

As Broker/Owner of Help-U-Sell Full Service Realty, David Bartels advocates for homeowners by helping them keep much more of their equity, by offering.

As Broker/Owner of Help-U-Sell Full Service Realty, David Bartels advocates for homeowners by helping them keep much more of their equity, by offering.

Feb 8 4 minutes read

There is an interesting metric used in the real estate business to evaluate the nature and health of the market.  It is the 'absorption rate,' or the rate at which listings in inventory are absorbed by the pool of active buyers.  

It is calculated by first discovering how fast homes sold during the recent past - say, six months - and dividing that into current inventory.  If we were averaging 50 homes sold per month over the previous six months and there are 300 homes in inventory today, that means that we have a 6 month supply of listings (300/50).  Sometimes absorption rate is expressed as a percentage:  what percentage of current inventory can we expect to sell this month?  In the previous example, we might expect to sell 1/6 of current inventory in a month, or 16.67%.

If all of that math makes your head hurt, don't worry; to understand the good news about absorption rate you don't have to know how to calculate it.

The good news?  The absorption rate for California improved by almost 40% over the past year.  In January of 2015 we had about a 3 month supply of homes for sale (32.3% absorption rate).  This past January we had closer to a 2 month supply of homes for sale (45.0% absorption rate).  Here in Ventura County, our absorption rate is even higher, approaching a one month supply.

What does all of this mean?  Homes are selling, and fast.  We have an inventory shortage; there are not enough homes on the market to satisfy the demand.  In a 'normal' market, you'd expect there to be close to a six month supply of homes.  Of course, here in Southern California, nothing much is 'normal,' so for us, three or four months would be pretty good.

For home sellers, this tight, low inventory market means that you have a good shot at selling for top dollar in a short period of time.  'Top Dollar' doesn't mean overpriced.  Even in the hottest markets, overpriced is still overpriced, and buyers rarely pay more than market value - or what an appraiser would determine the value to be - for a home.  If you've been thinking of making a move, my advice would be to call on a professional - me - to help you determine what you are likely to get for you home today, and whether selling now is a good plan.

Buyers, I know it's frustrating when the perfect home comes on the market and has multiple offers in a few days, but that's what happens in a market like this.  It is not a reason to withdraw from the process or to stop looking altogether.  It is a reason to get your ducks in a row, your finances in order, your pre-qualification letter in hand, and be ready to move quickly when the right home appears.  Prices will only be higher in another year and despite the competition today, this may be your best opportunity to own your dream home.

As always, we at Help-U-Sell Conejo Valley are ready to bring the considerable talent, knowledge and creativity of our team of professionals to bear on your home buying or selling project.  One of the things we do very well is to help people weigh the pros and cons of any real estate decision, and we offer that consultation to you with no obligation.  All it takes is a phone call.

Help-U-Sell Conejo Valley is a progressive, full service real estate company saving buyers and sellers thousands in Westlake Village, Thousand Oaks, Oak Park, Camarillo, Oxnard, Simi Valley, Los Angeles  and all of the Conejo Valley.  You may reach us at (805) 379-3300, or by email to [email protected]  Visit our website:  www.helpusellcv.com.

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