There are many things to consider when selling a home, but here’s a term that you may have never heard of: absorption rate. And, it’s important to know the absorption rate for your property before you list it for sale!
Allow us to explain …
The National Association of Realtors (NAR) has determined that a market in balance between buyers and sellers has a six-month supply of houses. This means that if no one else listed a house for sale, there would be enough homes on the market to meet demand for six months.
The formula is this:
- Total sales in the last six months divided by six = the monthly sales rate.
- Then, take the total houses for sale right now and divid it by the monthly sales rate, and this equals the absorption rate.
A low number would indicate that it is a seller’s market. On the other hand, a high number would represent a buyer’s market. You can apply this specific formula to a township, a price range, a county or an entire state. It is one of the key indicators used by Lawrence Yun, chief economist for the NAR, when he describes patterns of real estate sales activity in our country.
When determining the asking price for your property, it’s a good idea to have your Realtor perform these calculations on your behalf. If there is a limited supply of available housing, you can push the envelope with an asking price that’s on the higher end. However, if you’re fighting a large supply of available houses, you should be more conservative when it comes to your asking price.
Still confused? Call our office for a free, no obligation consultation. We’re always happy to help!