When selling your home, you cannot just focus on one statistic to determine the marketability of your home. Many factors, such as days on the market and absorption rates, affect a pricing strategy.
Absorption rates are something that should be discussed with your real estate agent during the listing process.
Simply put, absorption rates are the time it takes for the inventory of homes on the market to be sold.
Absorption rates also tell us if it is a buyer’s or seller’s market. You may have a buyer’s market in one price class and a seller’s market in a different price class of homes in the same community. This is the current circumstance in the Rim Country real estate market.
To mathematically calculate the absorption rate, divide the number of sales over the last 12 months by 12 to get the sales per month. Then, divide that number into the current active listing inventory for the price range to get the number of months it will take to sell off the inventory on the market. For example, if you sold 100 homes in a particular price range in 2012, you divide that by 12, which equal 8.33 or the number of sales per month. If your current inventory of homes in that price range is 50, you divide 50 by 8.33, which gives you a six-month inventory of homes in that price range. Six months of inventory is considered a balanced market.
If you have less than six months inventory it is considered a seller’s market. In our real estate market, some categories are an extreme buyer’s market and some are a seller’s market.
When selling your home, be sure to ask your real estate agent the absorption rate in your particular price range so you may effectively set a realistic pricing strategy that will make your home competitively priced and so it will not linger on the market.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.