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Tina's Real Estate Chatter

Tina Bilazarian, CRS,ASP,SRES's Blog About Central Massachusetts

By Tina Bilazarian | Broker in Shrewsbury, MA

How Much Can You Absorb?

I have written before about learning the language of buying and selling a home.  There are many concepts that your Realtor® can explain to you – Days on Market, Current Market Value, Inventory, Staging, etc.  An important concept that many find somewhat mysterious is the Absorption Rate.  It doesn’t have to remain a mystery.

The most basic explanation for the phrase “Absorption Rate” is that it is the rate at which the current market in a specific area or price range “absorbs” the available inventory.  How quickly will a house sell in the current market conditions. In order to compute this figure, key pieces of information are needed.  First, what type and price range should be considered to acquire the absorption rate for single family homes in Shrewsbury between $300,000 and $600,000?  

We need to compile how many homes fit the criteria of homes sold during the last 12 months, and how many are currently for sale.   Based on information* from the local Multiple Listing Service we know that 145 homes fitting that criteria sold during the last 365 days.  This gives us a rate of home sales for Shrewsbury of 2.5 – which means that on average one home sold every 2.5 days.

Currently there are 41 homes for sale in Shrewsbury, therefore, this number of homes multiplied by the ‘rate of home sales’ equals 103.20 days or 3.44 months.  Based on these figures, it can be said that if the current market conditions do not change and if no new listings come on the market; it would take 3.44 months for the current inventory of $300K to $600K single family homes to sell at this rate. 

How can knowing this information help you as a home seller?  It can give you an idea of the length of time your home may be on the market at the current pace.  As a buyer, if your Realtor® knows this information, it can be very helpful during the negotiation process. 

 
If you are interesting in buying or selling a home, please contact us. 
Tina Bilazarian, tina@bilazarian.com
 

Disclosure:   Information from MLSPIN reflects homes sold in 01545 between Feb. 10, 2012 and Feb. 9, 2013 and homes currently available on Feb. 9, 2013.  Figures rounded to nearest 10th of decimal point.
Posted by at 6:07 AM

Comments

By Liz Wiederhold,  Tue Feb 12 2013, 06:13
An excellent, straight forward explanation of absorption rates.
By Trevor Curran,  Tue Feb 12 2013, 06:56
Tina, wow, superb and detailed explanation! When all is said and done, a homeowner does best listing a home for sale with an experienced real estate agent like you. Your experience clearly must make it easier for your Sellers to get a home sold quickly and at the right price.

Thanks again for a great blog!

Trevor Curran
NMLS #40140
By Tina Bilazarian,  Tue Feb 12 2013, 09:13
Thank you - appreciate... hope it helps you along the way also.. the best in 2013 !!

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