Absorption rate info

[Flygirl 152]

I was invited a while ago to participate in Active Rain, but never got the chance to log on and accept. The other day I was just cruising the web, and saw some comments while I was on Google about absorption rate, so I clicked on it to check it out. Thought I would share it with you all. Hope you are all enjoying the spring weather.

http://activerain.com/blogsview/20685/How-Absorption-Rate-is

 

[NC Old Guy]

I guess it is just me. Think it would be just as easy to divide the 30,000 by the 4,000 & decide you have a7.5 month supply. Sure gets rid of a bunch of useless calculations.

Now, the debate would be whether or not the under contract are listings or sold. They are NOT available for sale & are part of the sales activity so not really listings. Sounds like a topic for a "poll".

 

[hastalavista]

I think it is Hicks who points out that the term "absorption" is misapplied in the example. And Santora points out that the so-called standing inventory (in term of months) can change in a heart-beat if the asking prices change.

I do think the calculation is useful if only to provide the user with an indication of how many sales are occurring in relationship to the number of actives available. If the numbers point to to 12+ months of inventory available (which they do in many of my hardest hit market) the reasonable conclusion to draw is, "something's gotta give." In my opinion, that something is usually price levels.

BTW, Deb, I spoke to my buddy in SoCal today and he said he saw recent short- and REO-list activity being aggressively priced (low) to sell; and these homes were experiencing minimal time on the market with multiple offers. So, I think the "price has gotta give" theory is in play (full credit to SS on that). What has yet to be determined is this: Recent FED survey of loan officers indicates there is an across-the-board tightening of credit. I think we do have a pool of ready-buyers waiting to take the plunge (I don't know if there is enough to stop the bleeding in price declines in certain markets, but certainly enough to slow it down or create a "floor" price)- however, if I'm ready to buy but the lending guidelines have changed so that I don't qualify for the asking price, there's only one option for the seller if they really want to sell. :new_smile-l: