Friday, August 27, 2010

Absorption Rates for the South Metro Area

Here's a quick outline of what the current absorption rates are for the south metro area at this time. These numbers were pulled from Georgia MLS so we must give the disclaimer that the information is "deemed reliable, but not warranted. Subject to errors, changes and omissions". :)

What's an absorption rate? Absorption rate is a term used in real estate regarding the current inventory level and is a calculation that shows how much time it will take for the current inventory to be "soaked up"/absorbed/sold. The calculation is based on the current trend and rate of sales.

Butts County: 13.1 months
Clayton County: 5.2 months
Coweta County: 10.6 months
Fayette County: 13.2 months
Henry County: 8 months
Rockdale County: 9.6 months
Spalding County: 11.7 months

Here's a quick guideline to using the absorption rates in regards to the current real estate market:

  • 1-4 months inventory means that we're in a sellers' market and we can expect appreciation.
  • 5-6 months inventory means that we're in a stable market with prices following inflation
  • 7+ months inventory means that it is a buyers' market and we can expect depreciation.

You probably didn't have to read this blog to have known that we're in a buyer's market and are experiencing depreciation (to an uncomfortable extreme!). You may have noticed that Clayton County is reflecting an absorption rate of 5.2 which would imply that there is a stable market in Clayton County. If you're a Clayton County resident, don't start jumping for joy just yet. When we look at these absorption rates, they're almost like an average. To get an even better picture, you can break it down further into price ranges and then look at the absorption rate for each price range. So for example, in Clayton County the "average" absorption rate is currently 5.2 months. For homes priced under $100k, the rate is 4.1 months. On the flip side, for homes priced $125k-150k, the rate is 10.2. Because a high majority of homes being sold in Clayton County are homes priced below $100k, it messes with the absorption rate a little bit and could trick people into thinking the market was improving in Clayton County. We're praying to see that day soon! From time to time, we'll start posting the absorption rates and comparing them as well so that everyone can stay on top of the inventory levels and have an idea as to where the market is heading! If you would like more specific information on the absorption rate for your area (specific city, price range, etc) please call or email us and we'll be happy to send you some information.

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