Absorption Rate in Palm Beach Gardens Jumps to 12 Month High
Month after month pending home sales are one metric we have watched closely to help us determine where sales may be heading in the upcoming months. With so many short sale transactions that sit as contingent for what seems an eternity and with some buyers having multiple contracts at the same time just hoping one of them comes through the validity of these numbers remains in question. We need to watch closely the homes that go under contract each month so we have decided to change from tracking pending home sales and start bring our readers the latest absorption rate in each community.
The absorption rate is perhaps the easiest way to understand the market conditions in any given area and we will now track this metric the middle of each month instead of the pending home sales. The absorption rate in these articles will give the absorption rate in months and is simply the number of months the market will take to “absorb” the current inventory based on the sales level during the preceding month.
For our first report the absorption rate in the communities we track the numbers are in and here are results for February;
Juno Beach –
Palm Beach Gardens – 14.52 months
Hobe Sound – 15.09 months
Tequesta 15.86 months
Our 3rd place finisher weighing in with an absorption rate of 14.52 months which means that is how long the market will take to absorb the current inventory based on the sales volume during that past month. It is important that we watch the trend of this number to give us an idea of how much the market is improving, or declining. Over the past year the average monthly absorption rate has been running at 11.8 so we are running way behind that average.
Again the absorption rate provides us a mathematical representation of the relationship to supple and demand and when paired with our monthly look at inventory changes and sales paints us a good picture in which direction the market is headed. We typically describe a buyer’s market when the absorption rate exceeds 7 months so overall we are still in a buyers market. With that being said for different product types within a market will tell a different story for each property. For instance a single family home priced at $325,000 in one community will have a completely different absorption rate than a $189,000 townhouse a few miles down the street.
The absorption rate is just one more valuable tool to assist both buyers and sellers in making knowledgable decisions and a great tool to better understand the local real estate market.