Thursday, May 5, 2011

Real Estate Market and Absorption Rates

An absorption rate is used to predict the future real estate market based on the past 90 or 180 days. When a seller is pricing their home, they want to know they are pricing it fairly, but they also want to know how long will it take to sell? Well, I would need a crystal ball to really answer this question, but we can use statistical information to predict the answer.
If you were pricing your home to sell at $150,000, then I would consider your ‘micromarket’. Using the city of midland for an example, there are 37 homes currently for sale from $130,000 to $170,000 ($20,000 either side of your $150,000 list price). In the last 90 days, 29 homes have sold or accepted offers in the same price range and location. So, if it took 90 days to sell those 29 homes, how long will it take to sell 37? 114 days, or under 4 months. This is a great absorption rate! Now, if you want to sell faster, price your home more conservatively to shave days off your marketing time.

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