Absorption Rates For Boston Neighborhoods

David Bates / June 15, 2012-11:52 am

The absorption rate is a number which represents how long it will take at the current sales pace to sell the entire inventory of homes currently available on the market.

For example, if there are 50 homes on the market and the market is selling 10 homes a month, then the market has a five-month supply of homes, an absorption rate of five.

The absorption rate is a good indicator of the strength of a real estate market. The lower the absorption number, the stronger the market; the higher the absorption number, the weaker the market. I’ve heard real estate consultants say that an absorption rate of 1-3 months is a seller’s market, 4-6 months is a neutral market, and over six months is a buyers market.

Realtor.org posted that, “Even in a hot market, it’s rare for more than 50 percent of homes to sell.” What does that say about Boston, where the condominium market recently posted an absorption rate which reflects nearly 58% of the on-market condominiums finding buyers in the last month? If you are looking for a sign that our market has changed, this might be it.

I’ve listed below the absorption rate for a number of Boston neighborhoods.

 

Area

Absorption Rate

Jamaica Plain

0.85

South Boston

1.00

South End

1.10

Brighton

1.30

Charlestown

1.42

The Fenway

1.47

Boston

1.71

Beacon Hill

1.78

Roslindale

2.31

Back Bay

2.76

West Roxbury

2.76

Waterfront

2.89

Dorchester

2.89

Mid Town

3.75

North End

3.75

(Numbers are based on a BatesRealEstateReport analysis of MLSPIN for under agreements in past month ending on June 13, 2012 compared with an MLS On-Market Snapshot Report of current inventory for June 13, 2012 – which excluded “active status back up” inventory.)