Monday Coffee With Al & Dee

A windsock tells you the direction and intensity of the current wind in an area.  Well, in real estate we also have a windsock that tells us what the market is in a specific neighborhood is and what it may be.  We call it the Absorption Rate. 

Tracking it in Biloxi, Ocean Springs, Gulfport over time, and you have a trend for a specific city or neighborhood.  This is a very useful tool that helps us keep our clients abreast on the current market conditions.

To determine the Absorption Rate in your neighborhood or even the overall market environment of a city, simply divide the total number of active listing by the average number of sales per month.  The result gives an estimate measured in months of how long it would take to sell off the current inventory of listing. It's important to remember that Absorption Rate change weekly depending on closed sales, new listings, and other factors. 

This figure is very easy to determine on your own.  You only need to know two things - the total number of active listings (homes currently t to mention that this estimate does not take into consideration any additional homes that will come on the market in the future.   

For example, if 100 homes sold per month and there are 800 homes currently for sale, then there is an 8 month supply of inventory for this particular market. Anyone considering selling a home must place the emphasis on having their home priced properly for its location and condition.

Absorption Rate:  800 listings / 100 average sales per month = 8 months of inventory

This is a very useful tool which can help you to determine the direction that things are trending. Think of the absorption rate as a "windsock" for the real estate market.