Absorption Rate Holds Steady

Westcoe Realtors, Riverside, California…The absorption rate for the beginning of July, 2008 has held steady at 6.1 percent, matching the rate posted for the previous month of June.  The absorption rate is a measure of sales activity vs. available inventory, and those who frequent this blog on a regular basis (and if you don’t, why not?!) understand how incredibly important this measure is as an indication of the real estate market’s overall health and activity. 

An absorption rate of 6.1 means that it would take approximately 6 months to sell all of the available inventory for sale at the current rate of sales activity.  This 6.1 rate for July 1 is compared to a rate as high as 39.0 in September of 2007, and is truly an indicator that while prices have indeed fallen dramatically, the current real estate market is alive and kicking with sales activity at these new, lower home prices.

Since the beginning of 2008, the sales activity has risen from a January level of 154 sales for the Riverside area to June’s level of 428 sales…and the number of available homes for sale has held basically steady, with 2706 homes for sale in January as compared to 2602 on July 1, 2008.  All of this data paints an interesting picture of market stability in the number of homes for sale, combined with an increasing rate of sales. 

It is apparent that while the media continues to tout the vast number of foreclosure properties still “flooding the market”, the reality is that the number of new bank owned properties is generally keeping pace with the number of people who are looking to buy.  Call me crazy, but that sounds like a stable marketplace…and the numbers seem to prove that out.

Does this mean pricing has hit the bottom?  In many areas, we are very close…but in some, where the previous sales activity of the past few years dominated the entire neighborhood (a new housing tract, for example), there is probably more room for prices to edge downward.  However, as the numbers reported today indicate, at least the sales market is starting to rebound and support the new properties for sale…and that is the first step to stopping the merry-go-round of the past 12-18 months.