What is the absorbtion rate of single family homes in my neighborhood?

 Westchester County Spring Market 2023

What is the housing absorption rate?

The housing market is an important indicator of the overall health of the economy. One crucial metric used by real estate professionals to determine the state of a local housing market is the housing absorption rate. This metric measures the rate at which available housing units are being sold or rented over a specified period of time in a particular market.

In simple terms, the housing absorption rate is the percentage or ratio of the number of homes sold or rented during a specific period of time, typically a month or a quarter, to the total number of available housing units in that market. The formula for calculating the absorption rate is straightforward: (Number of units sold or rented / Total number of available units) x 100.

For example, if there were 500 available housing units at the beginning of the month, and 50 of them were sold or rented by the end of the month, then the absorption rate for that month would be 10% (50 / 500 x 100). This means that 10% of the available housing units were sold or rented during that month.

The housing absorption rate is a crucial indicator of the health of a local housing market. A high absorption rate suggests strong demand for housing, which can lead to rising prices and a shortage of available units. Conversely, a low absorption rate may indicate an oversupply of housing, which can lead to falling prices and a surplus of available units. Understanding the absorption rate can help buyers, sellers, and investors make informed decisions about the housing market.

Local Community Absorption Rates

Let's use some real-world examples to illustrate the importance of the housing absorption rate. Suppose we look at the housing market in Pelham, New York, on February 15, 2023. At that time, there were 11 active homes on the market, and three of them sold during that time period. Therefore, Pelham's absorption rate is 27% ((3/11) x 100). A rate above 20% is generally considered a seller's market, indicating strong demand for housing.

In contrast, New Rochelle's absorption rate during the same period was 46% (19 sold out of 41 active listings). While Mamaroneck's absorption rate was 150% (12 sold out of eight active listings), indicating a very strong seller's market. Rye's absorption rate was also high, at 122% (11 sold out of nine active listings).

It is important to note that the housing absorption rate is just one metric to consider when evaluating a local housing market. Other factors, such as housing inventory, average days on the market, and pricing trends, should also be considered. However, the absorption rate provides a valuable snapshot of the current state of a local housing market, which can be useful for buyers, sellers, and investors alike.

In conclusion, the housing absorption rate is a critical metric that helps determine the health of a local housing market. A high absorption rate suggests strong demand for housing, which can lead to rising prices and a shortage of available units. On the other hand, a low absorption rate may indicate an oversupply of housing, which can lead to falling prices and a surplus of available units. By tracking the absorption rate, real estate professionals and investors can make informed decisions about the local housing market.

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