Selling Your Home. What is the Absorption Rate and Why Does it Matter?

There are a number of terms which real estate agents use to place markers on what is happening or likely to happen in the marketplace . One of the most frequently used terms is, the Absorption Rate. The Absorption Rate is defined as the amount of months that it would take to deplete the current housing inventory in a particular real estate market if homes continue to be Sold at the current rate.

An Absorption Rate of six months is generally considered a Balanced Market. Absorption Rates greater than six months are considered to be an advantage for Home Buyers while lower Absorption Rates give Home Sellers the upper hand. Currently, the Absorption Rate in many communities in West Michigan is less than 5 months

Suppose you are currently trying to sell your home in Grand Rapids, Michigan and have found that you are not receiving a lot of requests for home showings. How can the Absorption Rate help you determine what you need to do to sell your home?

It is important to know what the Absorption Rate is for your specific neighborhood, not just your larger community. If the rate is less than six months and especially if it is below four months, the market is talking to you and it would behoove you to listen if selling your home is your ultimate goal. A home with little showing activity in a Hot Seller’s Market is either over-priced or shows poorly in comparison to other similar homes.

The remedy for this problem is to either lower your home sale price to reflect the current market realities and/or invest money in acquiring the professional assistance of a home stager to help you set up your home for success.