Post Falls, ID Absorption Rate – How many months of inventory & what does it mean?

Absorption rate is an interesting thing.

If it’s too high, it means it’s a buyers market.  If it’s too low, it’s a sellers market. But, what is too high, what is too low?  What does absorption rate mean anyway?

Absorption rate is how many months of inventory (homes for sale) are currently on the market.  In other words – if you look at everything that’s available for sale TODAY – and how many homes are selling each month – you’d know how many months it would take to sell all of those homes on the market (without adding any other homes to the inventory).

Clear as mud?

A balanced, healthy absorption rate is 6 months (prices rise slowly & steadily with a healthy economy).  Any inventory levels 0-3 months is a strong sellers market (prices tend to rise quickly and out of whack with reality, as they did in 2003-2006).  Any inventory beyond 9-12 months indicates a strong buyers market (prices tend to decline).

A year ago we were sitting at over 13 months of inventory – prices were declining rapidly.  Today we are sitting right at about 10 months of inventory.  Price declines have slowed (but not disappeared completely).

What does that mean for your home? Prices are still declining, recovery will be slow.  If you want to sell in the next 3-5 years, do it NOW while your home is at it’s highest value.

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