Friday, April 2, 2010

Absorption Rates for Greater Albuquerque market areas

This article utilizes Absorption Rate, a key market indicator found in the Monthly Market Reports, to highlight existing single-family housing conditions in the Greater Albuquerque market areas. The data used for this Number Crunch article will be for single family, detached homes that are for sale now and for listings that were reported sold in the last year.

Definition of Terms:
Absorption Rate (AR) – The absorption rate measures how long it will take to exhaust the current housing inventory. An average market is traditionally a six-month supply. The rate is refered to as MSI, Monthly Supply of Inventory.

How SWMLS calculates the Absorption rate:
The absorption rate calculation is the number of active listings divided by the monthly sales average. An example explaining how January’s 7.99 AR was calculated follows.

We’ll start with the Active listings. There were 4,766 Active detached listings for January. This number was obtained from a Feburary 5th data pull. Active listing counts for monthly reports are typically obtained on the 5th day of the following month.

Now for the monthly sales average. In order to determine this average, we need to look at 12 months worth of monthly homes sales, that's 12 sales values divided by 12. The January 2010 sales average was 596.17. Another way of saying it is from January 2009 to January 2010 an average of 596.17 homes sold each month in the Greater ABQ Market. The monthly sales average has been between 573 and 600 for the last twelve months.

The calculation for the January absorption rate is going to be 4,766 / 596.17. It will take 7.99 months to exhaust the current supply of homes for sale.

The absorption rate for detached homes, since May 2008, has stayed between 7.2 and 9.2. A traditional market is considered to have a 6.0 absorption rate.

Here is a breakdown of all Active listings for sale SWMLS Areas and they're corresponding Absorption Rates. (as of February 22, 2010)

MLS Areas for Bernailillo County and Corrales

* N/A for Area 112 due to no sales.
**For the Bernalillo County areas the highest AR is in Area 80. This area has averaged around 10 sales a month in the last year (Average MLS area sales are 15) and has an inventory of 180 homes (Average MLS area Active listings is 126).

MLS Areas for Sandoval County

MLS Areas for East Mountains and Estancia Basin

*Areas 231 and 271 show a skewed number, with values over 100 for the months supply of inventory. These values are high due to low sales and a small Active inventory.

MLS Areas for Valencia County

*N/A for Area 690 due to no sales.

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