An Example

Why is the market absorption analysis important? The inventory supply column reflects the estimated length of time that the current available property inventory (homes for sale) in each price range, will take to sell based upon the sales in the past six months. It is not a forecast of the future, but rather a guidance based upon the recent history and is an indicator of the market conditions.sample-absorption-analysis.jpg

In this example, there is a 24 month inventory of availble properties in the $1.8 to $2 Million range in <CITY NAME>, but a 48 month supply of similarilly priced homes in <SUBDIVISION NAME>.

Some of the many deductions from this analysis;

  • Buyers may be finding better value (price, location or condition) in such properties elsewhere in the CITY.
  • Homes in SUBDIVISION NAME may be overpriced. 
  • Buyers have determined that there is no value in the $2 Million plus price range in the area.
  • CITY wide, it is a sellers market (marginally) for homes in the $1-$1.2 Million range.
  • If you wish to sell your home for $1.6 Million range in the SUBDIVISION, pricing it just below $1.6 will most likely result in a faster sale due to the faster absorption rate (6 times faster) for homes priced $1.4-$1.6 (7.5) as opposed to $1.6-$1.8 (42).
  • Presuming that buyers determine that the subject property subdivision is where they want to live, a seller in the $1.6-$1.8 Million price range will need to have to ensure that their property shows better than the other 7 currently availble, and can expect that the sale will take on average 6 months to conclude. Professional home staging can be used to ensure that the property presents better than the competition.

Using the Absorption Analysis to set the asking price.

Now that we have the absorption analysis created, print out several of the listings in each of the price ranges, both sold and for sale, and review them with the seller.

The seller should be quickly able to determine the properties that best compare to their properties, and can now better guage the best asking price to most likley conclude a satisfactory sale, most money in required timeframe.

Copyright © Raymond Property Group 2007

Got a question on this or South Florida real estate trends? – visit my website for south Florida real estate trends


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