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A good Realtor uses many different metrics to determine how to price a home for sale. An important metric that is often overlooked is “absorption rate”.

 

What is Absorption Rate?

It refers to the rate in which active listings are selling in a given market. A low absorption rate means that homes are selling slowly (suggesting a buyer’s market) while a high absorption rate means homes are selling quickly (suggesting a seller’s market). Generally speaking, anything over 20% is considered a seller’s market. 

In July the absorption rate for Single Family Homes in Pinellas County stood at 50%. In the last four years it has reached or exceed 50% three other times. May and June 2017 and May of this year. 

 
Pinellas Absorption Rate Graph.png

Proactive and data driven agents (like us 😎) know that this market statistic - more so than many others - is a great indicator of where the market is heading. Last month, we discussed how inventory continues to go down, especially in the sweet spot ($200,000 - $400,000) and how prices continue to increase. We are seeing this trend in a lot of areas around the country, but it’s more pronounced right here right now because we’re Florida - we have great weather, we have more and more fortune 1000 companies calling Tampa Bay Home every year, we have a relatively affordable cost of living, AND we have lower taxes than many other metropolitan areas nationwide (we’re looking at you NY and CA!) That being said, we do however have to keep a watchful eye because while average gross household incomes are also on the rise, they are not keeping up with the pace of rising home prices. In short something has to give; no market can go up forever and although we are not talking about  a repeat of 2008, responsible planning before the market shift more is prudent and essential to protecting your current equity or future investment. 

 

Absorption Rate - A Market Snapshot

Every neighborhood is different; a great case in point is the current trends for the 33778 zip code in Seminole:

  • In the last 12 months, 183 Single Family Homes sold in 33778.

  • This represents an average of 15.25 homes sold per month.

  • Today there are 22 homes available.

  • This absorption rate translates to a whopping 70%!!

That being said, although inventory is down 10% in this zip code there are still some homes that have been on the market over 90 days. The key is pricing right.

As we approach the 4th quarter of 2019 right now is the time to start planning for 2020. Remember that real estate is hyper local and every neighborhood and home is different.

As we approach the 4th quarter of 2019 right now is the time to start planning for 2020. Remember that real estate is hyper local and every neighborhood and home is different.

 

If you are thinking of making a move in the next 3 years let's talk about how the current state of the market affects your home’s value or future home purchase.

For a full version of the July 2019 Market Statistics check here.