Absorption Rates, What’s Hot – What’s Not (June 2018)

by David Howell on June 11, 2018

 

As we head into the summer months, the overall DC metro real estate market is doing well. As one would expect, some areas are doing better than others. And it isn’t just location that’s the big factor – price range and property type play a big role as well.

Among the indicators we track to judge how the market is doing is the “absorption rate,” simply the percentage of homes on the market that are going under contract every month – those that are being “absorbed.” The higher the rate, the more leverage sellers have; lower rates tilt the scales in the favor of buyers. We segment rates this way:

Absorption Rates

One of the hottest markets this year is Capitol Hill in DC. As the table below shows, the market is “absorbing” 60% of the available inventory of attached homes every month – an “extreme” seller’s market. For that same type of property, the absorption rate in Bethesda/Chevy Chase, Maryland is a very healthy 50% – but just up the road in Rockville, the rate drops to 22%.

Absorption Rates 1 As hot as the market in Capitol Hill is, it’s not the same for every property type. We looked at activity over the last four months for attached homes and for condos priced between $700,000 and $1,000,000. With an absorption rate of 60%, attached homes are almost twice as likely to sell in a given month as condos

Absorption Rates 2

We see these differences throughout our market. Just one more example – in the City of Alexandria, detached homes priced between $400,000 and $500,000 have an absorption rate of 30% – indicative of a balanced market. Yet attached homes in that same price range have a 60% absorption rate.

Absorption Rates 3

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Before joining McEnearney Associates in 1996, David was the owner and Principal Broker of his own real estate company for 12 years. David was the Managing Broker of our McLean office from 1996 - 2010, and was named our Chief Information Officer in September, 2010. In that role, he is responsible for the firm' technology, market information and public relations, and is the author of our MarketWatch newsletter. He is also Principal Broker for McEnearney Associates in Maryland, and is an Associate Broker in Virginia and Washington, DC.

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