Kansas City Real Estate Thoughts...
As we prepare for the spring real estate market here in Kansas City, I thought I'd take a look at our local housing absorption rates. We are in a buyer's market right now and analyzing the local absorption rates will help determine how far we have to go to get back to an equilibrium. In addition to posting the following statistics, we'll come back in a couple of months and see how the local real estate market is trending.
 An absorption rate is the length of time (based on recent sales history) it would take to sell all of the homes currently on the market within a chosen search parameter. The group of homes being analyzed can be whatever parameters you choose, such as price range, area, etc. The goal with absorption rates is to determine trends in a local real estate market and the rate can be figured in several different ways. Absorption rates are often based on the previous 30 days sold statistics. Some choose to define "solds" as homes closed (common) or you may prefer to define "solds" as homes that had contracts written on them. Since sold typically means homes that have closed, those are the figures I use. If you feel that looking at just one months sold stats is too narrow-minded, you could take the number of homes sold over the previous 12 months and divide that number by 12 to get a number of homes sold per month. There are advantages (one bad month doesn't skew the stats) and disadvantages (10, 11, 12 months ago is a long time ago - especially in our current market) to doing it this way. Here are a few examples... If 100 homes are being sold per month and there are 500 homes on the market, then the absorption rate is 5 months. If 100 homes are being sold per month and there are 1,000 homes on the market, then the absorption rate is 10 months. If 200 homes are being sold per month and there are 1,000 homes on the market, then the absorption rate is 5 months.
So let's have a look at the absorption rates in a few of our local areas (using the past month as our basis for sold history): Location | Sold Past 30 days | Homes For Sale | Absorption Rate | Overland Park Kansas | 100 | 1043 | 10.4 months | Leawood Kansas | 25 | 399 | 15.9 months | Lenexa Kansas | 40 | 350 | 8.7 months | Olathe Kansas | 100 | 955 | 9.5 months | Shawnee Kansas | 38 | 461 | 12.1 months | Gardner Kansas | 18 | 286 | 15.8 months | Prairie Village Kansas | 15 | 129 | 8.6 months | Kansas City Missouri | 262 | 2629 | 10.0 months |
These absorption rates are higher than we have seen for some time but do keep in mind the time of year for our sold basis - later January/early February - which traditionally is a slow time of the year for real estate closings. Also keep in mind that these rates can quickly improve or worsen - for example if Leawood had 50 sales rather than 25, the predicted absorption rate would be 8 months, rather than 16 months. We'll do this same study in a couple of months and check back to see if the spring selling season leads to an improvement these absorption rates.
Comments are always welcome - you can do so below!
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