First, the definition of the term ‘absorption rate’ is:
How long it will take all properties currently on the market to sell.
For example the city of Mauston has 88 properties currently for sale. Over the past year 36 homes have sold, which averages out to 3 sales per month. Dividing monthly sales by number of homes for sale gives you 29.3 months to absorb all the homes currently on the market. Make sense?
The absorption rate is a significant indicator of the health of a real estate market. The goal is to be around 6 months. A number less than 6 indicates that it’s a sellers market. Why? Because homes are moving at such a rapid pace sellers have the ability to be picky when choosing to accept an offer.
Obviously over 6 months means that we’re in a buyers market. With homes moving slower buyers are better able to draw a line in the sand in regards to a final purchase price.
Following are the absorption rates for all of our surrounding areas:
- Mauston: 29.3 months
- New Lisbon: 34.9 months
- Necedah: 26.6 months
- Germantown: 44.5 months
- Lyndon Station: 28.8 months
My Take
Obviously the absorption rate for our area is high, thus giving buyers the advantage when entering into negotiations. I feel that it’s even more imperative that home owners make sure that their homes are ready to be sold. Paint, floors, staging, cleanliness are items a home owner can control.
The benefit to making your home show-worthy is that when a buyer compares your home to others on the market, guess who wins?
And that’s the goal. For YOU to win. Let everyone else worry about the 20+ month absorption rates.
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About Adam Holberg