Things to know about buying a new home. How to estimate my property value.
How much should I sell my house for and how likely is it to sell?
Definition of 'Absorption Rate'
The rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. A high absorption rate usually indicates that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.
Imagine that a city has 1,000 homes for sale. If buyers purchase 100 homes per month, the supply of homes will be exhausted in 10 months (1,000 homes divided by 100 homes sold per month). If a homeowner is looking to sell a piece of property, he knows that half of the market will be sold out in five months. This can help a seller decide when to list a home for sale. This rate does not take in to account additional homes that enter the market. The absorption rate can also be a signal to developers to start building new homes.
What the List vs. Sale Price Means
Knowing the percentage difference between the actual list and sales prices for the houses in a neighborhood speaks volumes about the current market’s activity. This is a strong indicator of which direction the market is moving, and will indicate how much less—or maybe even more—than the ideal asking price a homeowner can expect to get for their home.
List vs. Sales Price Comparison
|List Price||Sales Price||Difference (%)|
Generally speaking, if the percentage differences for homes that sold are between -5 and -10 percent, you’re in a soft market. Sellers aren't getting what they think their homes are worth. And they probably aren’t selling their homes as quickly as they’d like. If the percentage differences are between -10 and -20 percent or more, the market is extremely weak. Of course, if those percentages are positive, then you’re in a warm, potentially hot market.