Absorption Rate Drops Again

Riverside, California…According to statistics compiled from the local MLS, the March 2008 absorption rate for real estate in the Riverside area has dropped from last months 12.6 to a new low of 8.8.  This new 8.8 rate is the 6th month in a row this figure has declined, and is at a level not seen since October of 2006.

The absorption rate is calculated to show the length of time it would take for all available properties to sell given the most current sales rate, and it is a good measure of current market activity.

This declining absorption rate indicates the real estate market is returning to a more healthy level by showing that the available inventory of properties for sale is selling at a faster pace.  It is derived from dividing the amount of exsiting properties for sale by the most recent sales activity from the preceeding month.  The table below shows the details.

Month          Active Properties     Pending sales (previous month)     Absorption Rate

Sept. ‘07           3234                                       82                                                39.0

Oct. ‘07             3196                                       88                                                 36.2

Nov. ‘07            3191                                      105                                                28.0

Dec. ‘07            2940                                      105                                                25.8

Jan. ‘08            2706                                      154                                                18.0

Fe. ‘08             2776                                       221                                                12.6

Mar. ‘08         2837                                        317                                                  8.8

While the available inventory supply has declined almost 10% since October of 2007, the real change here has occured in the number of properties selling monthly.  Sales activity during this same 6 month period has increased over 300%, from 82 sales in October to 317 for March.  What does all this mean?

It means that this web site has touted for months that the current real estate market is one of the best times to purchase real estate we have seen in almost 10 years, and that the buying public agrees.  While we take no pleasure in some of the events that have caused this decline in pricing, the simple fact remains that we are swamped in great real estate buys.  It is now possible to purchase positive cash flow rentals with 10-20% down with a fixed 30 year loan.  This was unheard of just 12 months ago.

As we have said before, the prudent investor or first time buyer will hasten to purchase a home in this current market.  It simply doesn’t get much better than this, and this convergence of low prices and low interest rates have created the perfect storm for home buying.  It is an amazing cycle we are in, and will not last.  Once the Fed sees any strength in the real estate market, they will begin to raise rates accordingly. 

So…you can strike while the iron is hot, and 5 years from now wish you had bought all you could….or you can succumb to the media hysteria and remain on the sidelines while those individuals who flew in the face of the media “experts” in 2008 reap the benefits.  The choice is yours, but at least 317 people who purchased in Riverside have figured it out.  Hopefully you will too, as at the moment, there is plenty to go around.  Give us a call here at Westcoe…we will be glad to help.