First, the definition of the term ‘absorption rate’ is: How long it will take all properties currently on the market to sell.
For example, the Wisconsin Rapids area has 397 properties currently for sale. Over the past year 481 homes have sold, which averages out to 40 sales per month. Dividing monthly sales by number of homes for sale gives you 9.9 months to absorb all the homes currently on the market. Make sense?
The absorption rate is a significant indicator of the health of a real estate market. The goal is to be around 6 months. A number less than 6 indicates that it’s a sellers market. Why? Because homes are moving at such a rapid pace sellers have the ability to be picky when choosing to accept an offer.
Obviously, over 6 months means that we’re in a buyers market. With homes moving slower, buyers are better able to draw a line in the sand in regards to a final purchase price.
Following are the absorption rates for all of our surrounding areas:
- Wisconsin Rapids: 9.9 months
- Stevens Point: 9.2 months
- Marshfield: 11.5 months
- Wausau: 13.2 months
Individual communities within these areas can have significantly differing absorption rates. A few reasons could be the local school district (or individual school), the proximity to large employer, or even how close a community/subdivision is to various amenities.
Data provided by Adam Holberg, First Weber Group. Read more about Wisconsin Rapids real estate.
photo credit http://www.flickr.com/photos/thousandshipz/4519556125/