You may have noticed that the weather isn’t the only thing warming up in Utah. The real estate market has also started to heat up. Professionals use many metrics in order to understand the real estate market, one of which is called the “real estate absorption rate”. As a buyer, seller, or agent–understanding the real estate absorption rate for your area, can be a key piece of information. Similar to the notion of keeping stock on the shelves of a store, the real estate absorption rate is a single number that indicates how much time that stock will last. This number is one sort of indicator of a concept that many people have heard of, “supply and demand.”
Sellers Market: 1 to 4 months supply of homes
Neutral Market: 5 to 6 months supply of homes
Buyers Market: More than 6 months supply of home
The final number from the formula, tells us the number of months it would take to sell every listing on the market, if no other listings were added. It’s important to calculate more than a single month to get a better understanding, because the market is always changing, and homes are always being listed and sold. We calculated the absorption rates for the 1st Quarter, to get a clear view of how the market has been behaving–and we can see that January and February were both sellers’ markets. However, as we calculated the rates for March, we can see how quickly the market changes.
While sales were heating up, more sellers jumped into the market, and the rate jumped to a 7.03. This change from February to March is great for a seller, and informs them that the competition is greater, and they should be more aggressive with their listing price. It also lets a buyer know that the inventory has grown, and they can be pickier, and have more of an edge in the negotiation.
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