Absorption Rates and Selling Your Home

Posted by Karen Gustafson on Sunday, January 6th, 2013 at 8:14am.

Absorption RateBeing familiar with the absorption rate of homes for sale in your area will help you to understand exactly how your property will be appraised and what price you need to set when it comes time to sell. 

The absorption rate of homes for sale in your particular price range is used by appraisers to establish the current value of your property.  Most financial institutes require their appraisers to evaluate the absorption rate for at least three time periods including three months, six months, and twelve months prior to the present.  These rates will show appraisers if the absorption of homes for sale in the area has decreased, remained stable, or increased over a given period of time.  If a significant increase in the amount of days it takes to sell can be seen, this typically indicates that the market is slowing, and will likely result in a downward adjustment of value in your home.  More simply less demand or an increase in the number of days on the market equals less buyer interest and a decreased value.  Being able to recognize the significance in this is the best way for homeowners to ensure their homes are being valued fairly.

Another useful way homeowners can use the absorption rate of homes for sale in their price range, is to determine exactly what price they need to set in order to accurately estimate how quickly their home will sell given the current inventory.  This comes in handy if you want to sell as soon as possible.  The higher the number of days it takes to sell would indicate that you need to price your home competitively in order to get it noticed and sold more quickly. 

Here are a few charts that show current absorption rates and the total number of homes sold in Boulder County for 2012.  To see how absorption rate works, look at how quickly homes in the $500,001-$600,000 price range sell in comparision to homes in the $600,001-$700,000. Now do the same for prices ranging from $1,000,001-$1,250,000 and 1,250,001-$1,500,000.  They are about double the amount of time.

Boulder County 2012 Absorption RateNumber of Homes Sold Boulder County 2012

Karen Gustafson

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