When writing market reports, I provide a link to absorption rate. The absorption rate is a report of the current inventory  in a particular area or city, and provides trends in regards to the number of homes per month are selling over the past one year. This is important information for both buyers and sellers, as you can monitor trends by area by month.

If you are a buyer and writing offers or a seller and pricing your home to sell, this information provides you with information on what direction the market is going. This information will help you determine if it is a buyer’s market, a seller’s market or a stable market. If there is approximately five to seven months of inventory (meaning it will take that time frame months to sell all the existing inventory without adding new listings) then it is considered a stable market. Under five months is trending towards a seller’s market, and over seven months is a buyer’s market.

Absorption rates show monthly trends, and information about sales for past one month, three months, six months and twelve months.  Absorption rate is basically – the length of time it will take to sell all the active listings assuming that no new listings are added. This provides absorption rate.

Below is a recent graph of Cameo Shores market update graph.

I recently wrote a post about Cameo Shores Market Update in Corona del Mar and this is the graph from that post. I utilize excel to create this graph. It is calculated by taking the active listings, not the back up or pending as those listings are not available. Then I search for number of sold properties during the same time periods – one month, three months, six months, and twelve months to determine how many homes sold per month.

To calculate the absorption rate,  the active listings for that month are divided by the number of sold that month .If there are no sales, then you cannot calculate it for that month. One month does not generally establish a trend, however 3 months, 6 months and 12 months does establish a trend.

Less Than 5 Months is a Seller’s Market
5 Months to 7 Months is a Stable Market
7 Months or more is a Buyer’s Market

This is important information when you are pricing your home to sell, or you are making an offer on a Newport Beach home, or considering purchasing Newport Beach real estate.

If I can answer any questions about absorption rate, please contact me.