A key piece of data that many economic experts, real estate brokers and realtors agree upon is the importance of the "absorption rate" in the current housing market. The absorption rate to economists and brokers is the months of inventory available in a targeted market. To home sellers, the absorption rate represents the number of properties competing with their home on a month to month basis.
Think of a Hershey chocolate bar. Every convenience store manager stocks the shelves knowing how long it will take to sell a box of Hershey bars. He doesn't usually restock until the entire box is gone. The same concept applies to a seller's home: if there is a 12 month absorption rate, that means there are enough homes on the market at the current buying rate to last 12 months. In this case, the convenience store manager understands that he doesn't need a new box of Hershey bars for an entire year. The home seller understands that she may face long days on market--up to a year. However in the housing market, the "manager" is continually restocking the shelves: these are called new listings and affect the absorption rate month to month.
To home buyers, the absorption rate indicates the number of properties that are available to view (choices in a given price range) from month to month. At a 12 month absorption rate like the one described above, the housing market is generally considered a "buyers market."
SO, HOW IS THE CENTRAL MINNESOTA MARKET?
2005 to 2006/07 COMPARISON
A FOCUS ON ABSORPTION RATES
The current absorption rate for the entire Central Minnesota MLS area for residential properties is 11 months. Narrowing our focus to the St. Cloud Metro area (St. Cloud, Sartell, Sauk Rapids, Waite Park and St. Joseph,) however, reduces the absorption rate to 9 months. This rate has increased from 4 months in August of 2005, and from 7.7 months in August of 2006.
What this means to sellers is simply more competition, longer days on market, and that buyers will have higher expectations for the home that they purchase. To buyers it means more homes available to view and therefore more decisions to make, as well as a greater time investment in the process.
If you are interested in the absorption rate, days on market or other specific data in your neighborhood, give us a call or email.
