Lets talk about Absorption Rate in Frederick County

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Ab-what? Are we cleaning up a spill? Or a paper towel commercial? No. But similar idea…

The absorption rate is the rate at which the current real estate inventory would be absorbed by the current buying trends, if no more homes came on the market. (don’t try looking this definition up…this is the way I translate it.) Most real estate glossaries define it as follows;

Absorption Rate = Total Active homes divide by last months solds

The problem I see with using only last month, if it was historically a slow month then you think you have a high absorption rate. I prefer to looked at an average of the last six months. I feel that gives you a better idea of the real absorption rate. Why? The last six month will have some peaks and valleys that will be flattened out and give a much more stable number. Sure, you can do a whole year but might miss a current trend indicator that might be on a climb or decrease. An indicator of the market is the amount of months on the market on what type of market you are in.

Less than six months = Sellers Market ( High prices, low inventory, shorter days on market, less contingent contracts)

Six Months = Normal market.

More than six months = Buyers Market (Lower prices, high inventory, longer days on market, seller concessions, contingent contracts)

Below you have a table of the latest absorption rates of some of the areas in Frederick County. To put it into perspective, I have also added adjoining county averages. First blush looks like homes closer to the Washington DC area are moving fast than further out.

Market update in and around Frederick County 2/4/08

Area	Active	Contract	Sold in last 90 Days	Absorption Rate
Adamstown & Point of Rocks	33	8	16	6 Months
Brunswick & Knoxville	70	12	22	12 Months
Frederick	1100	135	281	10 Months
Ijamsville	45	6	6	17 Months
Middletown & Myersville	120	15	24	13 Months
New Market	122	16	27	13 Months
Thurmont & Emmitsburg	111	11	22	12 Months
Walkersville & Woodsboro	82	7	15	11 Months

Frederick County	1893	228	448	11 Months
Montgomery County	4822	963	1553	8 Months
Washington County	1316	122	218	16 Months
Howard County	1592	286	531	8 Months
Carroll County	1083	138	267	10 Months

Clearly we are in a Buyer’s Market. The Adamstown and Point of Rocks area are experiencing a much better market than the rest of the area.

If you don’t see your town above, send me an email and I will send you one. (it has to be in Maryland…that license thing restricts me from going elsewhere)

February 4, 2008 · Filed Under Frederick Market Conditions, Market Condition

Comments

12 Responses to “Lets talk about Absorption Rate in Frederick County”

Josette Skilling on February 6th, 2008 11:08 pm

It’s amazing how much inventory there is all over the state. And no area seems to be immune…
Carole Cohen on February 7th, 2008 3:46 am

I don’t see my town.
Looked up one community here, one sold last month while there are only 77 homes on the market. So the glass is either half full (low inventory) or half empty (77 divided by one is…..um…. lol)
gotbob on February 7th, 2008 12:17 pm

Josette, absolutely…the price range is all over the place.

Carole, argh! thats a lot of homes only to have one sale. Some sellers need to revisit the question… do they have to sell right now?
Jonathan Dalton on February 7th, 2008 10:05 pm

You hit one of the reasons I use a 30-day rolling average; update weekly, looking back 30 days.

The figure from any one week is less important than the overall trends that develop, at least to me.
gotbob on February 7th, 2008 10:16 pm

Jonathan, I don’t like flash-in-the-pan numbers either.
Carole Cohen on February 7th, 2008 10:22 pm

Jonathan and Bob, I think you need to send investor clients from your areas to Cleveland; prices are great and we can get rid of our three yr absorption rate
gotbob on February 7th, 2008 10:25 pm

Carole, the problem with Cleveland real estate is the word Cleveland.
Carole Cohen on February 8th, 2008 11:05 pm

Cleveland is the new Miami, Bob (global warming), haven’t heard huh?
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