Analyzing the Real Estate Market

The best tool for analyzing the market is the absorption rate. The graph below shows the absorption rate for single-family and condominum homes in King, Pierce and Snohomish Counties over the past 13 years. The greater Seattle metropolis market has been balanced or a seller's market throughout this time, but did transition to a buyer's market in 2006.

Seattle's urban neighborhoods faired better, and did not transition to a buyer's market until late 2007. Click on the links to the left to see absorption rates for Seattle neighborhoods.

For information about what an absorption rate is and what its strengths and weaknesses are, see below.

Market Graph

An absorption rate is the percentage of the inventory sold in a given period of time. It is a valuable tool for determining if the market is a buyer's or a seller's market. Percentages above 30% indicate a market favorable to sellers. Percentages below 20% indicate a market favorable to buyers. Anything in between indicates a balanced market.

It is possible to have absorption rates in excess of 100%, which can be confusing. For example, if there are 100 homes on the market and 60 of them sell with none coming on the market to replace them, there will be only 40 homes available at the end of the month. The absorption rate in this example would be 150%.

If the number of properties available in the area sampled is too small, the absorption rate can appear very erratic. This is because a small change in the the inventory or number of sales can create a high-percentage difference in the percent of inventory sold. (See Seattle-Southeast Condominiums for a good example of this.)

Keep in mind when viewing the graphs that a decrease in the absorption rate does not mean that prices are falling. It may just mean that prices are not rising as fast. However, if absorption rates are approximately 20% or lower, it is possible that depreciation will occur.

The statistics here and on the following pages were not compiled or published by NWMLS. Bob Melvey compiled the data and created the charts using monthly reports produced by NWMLS.

Bob Melvey
Assistant Manager
Windermere Real Estate
NW / Inc.

2636 NW Market St.
Seattle, WA 98107
Tel 206 789 7700
Cell 206 650 7880
Fax 425 671 0437
Email