Written by Tammie White, Principal Broker/Owner of Franklin Homes Realty LLC
What is Absorption Rate?
The simplest definition of absorption rate is the rate at which properties are sold in a given area. For example, there are currently 748 single-family homes for sale in Franklin TN. During March (the most recent month of closed data), 150 homes closed in Franklin.
If you take the current inventory of 748 homes and divide that by last month's closed sales (748/150), you get 5 months. That means if the current inventory stayed the same and the rate of closed sales remained the same, it would take 5 months to deplete or sell all the existing homes.
A normal market would be considered between 5 - 6 months of inventory. If there is 1 - 4 months of inventory, it is considered a seller's market. If there is more than 7 months of inventory, then it is considered a buyer's market. Based on the most recent data, Franklin TN is in a normal or steady market.
Remember, absorption rate is constantly changing as new listings come on the market.
Why is Absorption Rate Important?
If you are looking to sell your Franklin TN home the absorption rate will help you determine where you should price it for a quick sale. For example, say you are thinking about pricing your home at $450,000 and you calculated the absorption rate for homes priced between $450,000 - $500,000 was 14.3 months. However, homes priced between $400,000 - $449,000 had an absorption rate of 5.3 months. If you were looking for a quick sale, you might price under $449,000. However, if you weren't in a hurry and were prepared to wait, you might price over $450,000.
If you are looking to buy a Franklin TN home, knowing absorption rate may help you negotiate a better deal. Let's say you are looking at two homes. One is in Fieldstone Farms with an absorption rate of 2 months. While the other is located in Forrest Crossing with an absorption rate of 9 months. You may decide to purchase the home in Forrest Crossing because the seller may be more negotiable on his price because inventory is moving slower there.
Absorption rate is an important indicator of what is going on in your market and should not be overlooked. As in the examples above, the absorption rate can vary from city to city, neighborhood to neighborhood and even from one price range to another. Franklin Homes Realty LLC uses this information to accurately price their listings so they will sell in the least amount of time for the most amount of money.
If you are looking to sell your Franklin TN home, call Franklin Homes Realty at (615) 495-0752.
About Tammie White, Franklin TN REALTOR®
Tammie White is a REALTOR® and Principal Broker/Owner of Franklin Homes Realty LLC in Franklin TN. Tammie works with relocation buyers looking to purchase a home in Franklin and the surrounding Williamson County area. She understands the way buyers search for homes making her an invaluable asset to Franklin home sellers. Tammie's website, www.FranklinHomesRealty.com, has become the premiere search tool for buyers relocating to Franklin TN. She has been writing a real estate blog since 2009 and quoted in various publications including the LA Times, Skype.com, The Tennessean and Williamson Source.