Riverside Area Absorption Rate Drops 5th Month in a Row

(Riverside, California)…For the 5th consecutive month, according to statistics drawn from the local Riverside area MLS, the absorption rate of homes for sale in the Riverside area has dropped to it’s lowest point since March, 2007.  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 is a good measure of current market activity.

As an example, for the month of February, 2008, there were 221 properties that entered escrow, and as of the end of the month, there were 2,837 properties for sale.  Dividing this available inventory by the number of sales, our absorption rate for February is 12.6…which means at the rate of 221 sales per month, it would take 12.6 months to sell all the existing housing inventory available for sale.  This absorption rate number will change monthly, depending upon the amount of properties for sale, and the rate of sales for that month.  The previous months data is shown below.

Month                    Available inventory                  Sales                     Absorption Rate

August 2007                   3058                                  105                           30.8

Sept. 2007                       3234                                  82                              39.0

Oct. 2007                         3196                                  88                              36.2

Nov. 2007                        3191                                 105                             28.0

Dec. 2007                         2940                                105                             25.8

Jan. 2008                         2706                                154                             18.0

Feb. 2008                        2837                                 221                             12.6

What does all this mean? 

The main change in our market place has taken place with buyers.  The available inventory has not dipped too much, but the number of sales has increased almost 40% since September of last year.  September was the lowest point in recent history for sales activity due to the mortgage meltdown, but it is obvious buyers have figured out there are a number of incredible buying opportunities currently available.  This significant lowering of prices, combined with the current favorable interest rates has led many buyers back into the market.

While we would be loathe to predict the future (we are not any better at it than anyone else), what we can say is that it appears the real estate buying public has figured out the folly of waiting on the sidelines.  Prices are great, interest rates are extremely low, and the best buys are to be had now…not when the media tells everyone it’s OK.  Now, the buyer is in charge…wait for everyone else to figure it out, and who knows.  As we have said many times before, the smart money is getting in the market now.