An absorption rate is a great way to track the real estate market. It is calculated by dividing the number of homes on the market by the number of homes sold. It is a monthly indicator. If Coconut Grove’s absorption rate is 30, it means that it will take 30 months to sell of the inventory we have currently on the market. A very high absorption rate indicates a slow market, and also a buyer’s market.
A balanced market, according to the experts is a 6-9 month absorption rate.
Through my company, EWM, I have the ability to calculate the absorption rate for Coconut Grove. As you can see, we had a peak of 62 months back in September followed by a large decline. As we approached December, the absorption rate for Coconut Grove was only 15 months, and we thought the market here was looking pretty good. However, the next month we saw another jump up to 44 months. This was suprising to many realtors here, because typically the Grove market sees the most activity during the winter. We should have seen our lowest absorption rates during this time.
For some sobering perspective, back in May of 2002, Coconut Grove had an absorption rate of 4.9 months. Those were the days!
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