Absorption rates present a picture of how quickly properties are selling. An absorption rate analysis examines the current inventory of homes and looks back 6 months to see how many sales there have been to determine a monthly rate of sales over the most recent time period. Dividing the current inventory by the monthly rate of sales provides the number of months of inventory of homes.
Traditionally, 6 months of inventory is considered a balanced market. More than 6 months of inventory means that the market favors buyers. Less than 6 months of inventory and sellers are favored.
For the present analysis, I reviewed data on home sales for Alexandria City, Arlington County, Fairfax County, and Falls Church City (in other words, Northern Virginia).
In some of the lower price ranges, buyers have been soaking up sales of home like a dry sponge, leaving inventory in very short supply. For example, in the $200K - $400K price range, there's only 2.76 months of home inventory on the market. Contrast that with the $3 million plus uber-luxury market which has a 49.2 month supply of homes.
The data in the chart below should be useful to you whether you are planning to buy or sell a home in Northern Virginia in the near future:
|
Price Range |
Current Supply of Homes |
Sold in Last 6 Months |
Sales/Month (Absorption Rate) |
Months of Inventory |
|
>$3M |
123 |
15 |
2.5 |
49.2 |
|
$2M-$3M |
153 |
26 |
4.3 |
35.3 |
|
$1M-$2M |
727 |
225 |
37.5 |
19.4 |
|
$800K-$1M |
442 |
226 |
37.6 |
11.8 |
|
$600K-$800K |
830 |
703 |
117 |
7.1 |
|
$400K-$600K |
1220 |
1755 |
292.5 |
4.2 |
|
$200K-$400K |
1546 |
3355 |
559.2 |
2.8 |
|
<$200K |
679 |
1264 |
210.7 |
3.2 |
The sweet spot of sales is most certainly in the $200K-$400K price range.
While homes in the $800K-$1M price range and the $1M-$2M price range in Northern Virginia are selling at basically the same rate, there's almost 8 months of additional inventory of the higher priced homes.
Interested in the absorption rates for your zip code, style of home, or area? Just click here and let me know and I'll be happy to provide you with this analysis that can play a big factor in pricing your home for sale or deciding upon an offer price for your next home.
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I like the sponges Brian! Do you get this info from your MLS as a report or dump it into Excel and figure it out yourself? Nice job.
Our market is heating up a little too. Here's our Q1 report from Prescott, AZ for comparisons or for giggles.
Thanks for posting the stats! :) PS
Wow, I'd say you have an affordability problem -- except I don't know what the income level is there. It must be high.
I'm surprised to see so many homes in the $200-$400,000 range, Brian. I always think of Northern Virginia as being much more expensive than that. What zipcodes are you including in this analysis?