Nov. 3, 2008 - Q32008 Market Absorption Rate for the Triangle

Recently I wrote about the Wake County Market Conditions for the area and compared the results of the sales year over year. It gives one a good look at our current real estate market and what is happening in the market. Debbie Maxwell just published her Market Report and, along with it, she provided information on the current absorption rate in Charlotte. As an addition to my report I've decided to include this information as well. What is interesting is that the numbers for the Triangle are very similar to the numbers in Charlotte, with the exception that the spread between List Prices and Sold Prices is much higher in the Triangle.

So, what is the absorption rate for a market? The absorption rate is basically the representation of the relationship between supply and demand. The total amount of available product is divided by the total amount of product sold in the previous month. The resulting number represents the number of months it would take, at that same pace, to sell the entire inventory of product.

• "Normal Market" conditions exist when the Absorption Rate is between 6 months.
• "Sellers Market" conditions exist when the Absorption Rate is lower. (1-5 months)
• "Buyers Market" conditions exist when the Absorption Rate is higher. (7+ months)

Based on the numbers for the Triangle we are currently experiencing a Buyers Market like much of the rest of the country. With 10 months supply of inventory we have an oversupply of inventory. What is interesting to note is that, while we have an oversupply, homes are still selling at 97% of list price. This means that homes are selling in the area. There were 1792 closed transactions in the previous month. However, the current crop of sellers still isn't very flexible in coming off the price of their homes.

Next month, when I throw in the Market Absoprtion Rate for the area you will be familar with the term and it will hopefully give you the "big picture" on the current trends in the Market.