I always talk about how market segments behave differently across multiple property types, price ranges, and geographical pockets within the same city.
It’s impossible to provide a comprehensive overview of every scenario in a short blog post, but I thought it would be interesting to show how the absorption rate can vary by price range in a couple of different market segments (detached and townhome).
The absorption rate is the percentage of sales over the previous 30 days compared to the total inventory on a specific day.
For example, if the absorption rate is 33%, there is a 33% chance that a listing will sell within 30 days, on average. 33% represents a balanced market with no advantage to buyers or sellers. If the absorption rate is above 33%, it’s a seller’s market; if it’s below 33%, it’s a buyer’s market.
Of course, numerous other factors affect the saleability of any given property. Still, the absorption rate (if tracked over time) allows us to gauge the strength or weakness of a particular market segment and whether it is trending upward or downward.
One of the most significant factors that affect the absorption rate is the price range, especially in our current market where higher interest rates are affecting affordability, so the market is much tighter at lower price points:
Detached absorption rates
$400K-$600K – Currently ~100%; peaked at ~140% in May and June
$600K-$800K – Currently ~85%; peaked at ~120% for most of May and June
$800K-$1M – Currently ~45%; peaked at ~80% in May
$1M-$1.5M – Currently just below 30%; peaked at ~50% from mid-May to the end of June.
Townhome absorption rates
$250K-$400K – Currently ~145%, has blipped up and down in the range of 160%-200% at various times between April and July. (Note: This inconsistency results from extremely low inventory in this price range.)
$400K-$550K – Currently ~160%, the highest level all year! (This currently represents the hottest market segment in Calgary.)
$550K-$700K – Currently ~50%; peaked at ~70% from mid-May to mid-June.
$700K-$1M – Currently ~20%; peaked at ~45% from mid-May to mid-June
The other major segments are ‘Semi-detached’ and ‘Apartment condo,’ which are also extremely interesting (at least to a numbers geek like me), but I don’t want to overwhelm you with too much data!
As you can see, the “crazy market” is very much biased towards the lower price ranges, and some categories would now be considered in Buyer’s Market territory. This seems crazy in itself, but the numbers don’t lie!
Keep in mind that although the general trend is declining absorption rates, that does NOT mean declining prices. If the absorption rate is 100% now, but it used to be 200%, prices are still rising rapidly!
However, a declining absorption rate is a critical consideration when pricing properties today and using comparable sales from May and June for reference. The conditions are NOT the same as they were then, so a skilled and experienced agent must consider this factor, amongst many others.
By the way, how do I know all these stats? Do I just download them from the board?
Ha! Not a chance. I track all this data myself at the same time every Thursday (for consistency). It’s worth my time to do this since I’ve found the information invaluable to me and my clients (when appropriately interpreted).
Call me anytime if I didn’t cover your market segment within this post (or if you’d like a more in-depth overview). I’ll be happy to provide my opinion on how this information might help you make intelligent decisions about buying or selling, timing-wise, for example.
Until next month.
Ted