When selling or buying a home in Ventura County it is important to have an awareness of the market conditions and how they will impact your home buying or selling objectives. The Absorption Rate is a fairly uncomplicated metric that can be used to monitor market conditions. Because it is a simple calculation it also lends itself well to price and geographic segmentation. Absorption Rate is the rate at which homes are able to sell in a given period of time. The calculated absorption rate also determines whether the real estate market is a buyer’s or a seller’s market.
For example Ventura County’s absorption rate for June 2009 is calculated as follows:
- Total number of single family homes currently listed for sale in Ventura County: 1423
- Total number of single family homes sold last month, June 2009, in Ventura County: 508
- The total number of listed single family homes, 1423, is divided by the total number of single family homes sold last month, 508, to calculate the number of months it would take to sell Ventura County’s inventory of homes: 1423/508 = 2.8 months
The number calculated above, 2.8, indicates that it would take roughly 3 months to sell all the current single family homes listed for sale in Ventura County.
How does the absorption rate determines if it is a seller’s or buyer’s market:
- Absorption rate of 5-7 months indicates a Normal Market.
- Absorption rate of 1-4 months indicates a Seller’s Market.
- Absorption rate of 7+ months indicates a Buyer’s Market.
Based upon the calculation and guidelines above, an absorption rate of approximately 3 months indicates that the current real estate market in Ventura County is a seller’s market.
Although absorption rate is an important ratio in determining a real estate condition of an area, there are other factors that Ventura County home sellers and home buyers need to take into consideration.
The above number, 2.8 months, is an overall number for all of Ventura County. The city, neighborhood, condition of the home, and the price play a big factor in the period of time it takes to sell a home in Ventura County.
Home Sellers in Ventura County and the Real Estate Absorption Rate:
It is important for home sellers in Ventura County to look closely at the absorption rate in their area when it comes to pricing their home. A thorough knowledge of your area’s real estate market can help you decide on the appropriate asking price in the time period you wish to sell your home.
Home Buyers in Ventura County and the Real Estate Absorption Rate:
Knowing the absorption rate of certain areas is a great tool for home buyers during the negotiation process. Better still, understanding the absorption rate for various price ranges, such as shown in the Table below, can provide a means to set realistic expectations for your specific purchase.
Ventura County Absorption Rate
| Price Range | Total # of Single Family Homes For Sale | Total # of Single Family Homes Sold in June 2009 | Single Family Home Absorption Rate |
|---|---|---|---|
| 0-100K | 1 | 2 | 0.5 |
| 100K-200K | 25 | 30 | 0.8 |
| 200K-300K | 79 | 88 | 0.9 |
| 300K-400K | 124 | 125 | 1.0 |
| 400K-500K | 130 | 80 | 1.6 |
| 500K-600K | 128 | 59 | 2.2 |
| 600K-700K | 124 | 51 | 2.4 |
| 700K-800K | 110 | 30 | 3.7 |
| 800K-900K | 100 | 17 | 5.9 |
| 900K-1Mill | 84 | 10 | 8.4 |
| 1Mill-2Mill | 347 | 30 | 11.6 |
| 2Mill-3Mill | 95 | 7 | 13.6 |
While absorption rate is an arbitrary factor, it can be used by both home sellers and home buyers as a tool to better understand the real estate market in different areas of Ventura County and help make better home buying and selling decisions.
If you need any help determining the absorption rate in your area or if you need any help with selling or buying a home in Ventura County please feel free to contact me, Mana Tulberg: (805) 443-8898.
