Absorption Rate Versus Days on Market

avatarthumbnail.jpgOne of the questions that came up during my interview with Channel 5 yesterday afternoon is how long a home might sit on the market these days. And while I could quote a statistic, assuming I took the time to look up the average days on market here in Phoenix, it’s not a particularly telling stat.

When I first started tracking absorption rate I did so because it was a relatively clean statistic. Inventory numbers didn’t mean much to me without some sort of filter – high inventory is fine as long as sales are high, as we’re seeing at the moment.

Absorption rate gives an idea of the months of inventory currently available; it’s inclusive of inventory, the sales pace, raw sales … to me, it’s a useful statistic for taking a snapshot look at the market. And by tracking it for nearly three years, trends emerge.

Days on market never has been as useful because there are many reasons a home can remain untouched on the market that have nothing to do with market conditions:

  • Unrealistic seller expectations (read: price)
  • Condition
  • Location (city, area, neighborhood)
  • Location (backing to major road, shopping center, etc.)
  • Overall market conditions

There are too many variables at play for Days on Market to have much meaning (unless we’re discussing bank owned homes, where the market’s a touch more efficient.)

So to the question of “how long will it take to sell my home,” a lot depends on the seller and his or her expectations. Price your home at a 25% discount to the market and it almost certainly will sell quickly. Price it at market and it will take a little longer. Price it above market and you may as well not try.

And even with aggressive pricing in place, things like backing to major roads are going to lengthen the sales time when there’s high inventory. Unless, of course, you’re priced to compensate for those factors.

[tags]Phoenix real estate[/tags]

About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

  • A 25% percent discount would get your home sold for sure, but i think that might even be a little too much. I knew a guy that just sold a property that had an ok location, but next to a major street, and he sold it at about a 15% discount to the comps in the area. The buyers are definitely out there, its just a matter of time when you offer a low price.