Hey everybody, this is George Fotion, Call Realty, Best Palos Verdes Homes. And, you've heard the concept, false positive or false negative.

What is an “Absorption Rate? for Palos Verdes Homes or any market area? …

and why is this market index better for understanding the strength or weakness of the real estate market?  Simply, “average days on market” merely tells you one side of the “story” … how long it typically takes to sell homes actually chosen by real buyers.  But this ignores the full spectrum of SUPPLY and DEMAND.  The absorption rate tells us how long it will take to absorb UNSOLD INVENTORY through sale activity at the pace at which homes were taken off the market in any given unit of time by real buyers.  This is a far better measure of the market. 

Maybe you've been pregnant in your, some point in the last few years, decades, whatever. Or maybe you've had some medical test and the doctor said, you know, we have this percentage chance of a false positive or a false negative.

Real estate has the same thing. And the false positive or false negative is average days on market. That is a meaningless statistic.

It doesn't tell you anything about the strength or weakness of the market. You know what does? The absorption rate. How good is the market at absorbing inventory through sale activity?

That tells you really what the strength or weakness of any market or in any price range of a market. And that's, that's the reality of the marketplace we can't just blanket in this case the entire Palos Verdes Peninsula with what's the absorption rate for homes on the Palos Verdes Peninsula.

Clearly, there's different supply demand patterns that are affecting the absorption rates in these differing price ranges. And it doesn't or shouldn't come as much of a surprise that the higher the price range, the longer the number of days of unsold inventory.

The fact is there's just fewer buyers as you start climbing the affordability ladder. So for the 4.5 to 5.5 market, 420 days of unsold inventory on the market, meaning if you're thinking about selling, you need to mentally gear up.

For potentially being on the market for a while. Well, how do you, how do you affect change in this statistic?

What if you, what if you were a client coming to me and saying, George, I want to, I want to sell my house and I hear what you're saying about the number of days of unsold inventory and my price range being 420 days, but I need you to do it faster.

Well, how's that going to happen? But the facts are facts. So the only way you're going to deflect that pattern of supply and demand is by lowering your price.

If you want your house sold and unsold in 30 days, you're going to have to drastically adjust your price expectations to make sure you don't hit that 420 days of unsold inventory.

I mean, do you want to be the next property to sell in this price range or the last property to sell in this price range?

Those are questions you have to ask yourself as a, as a seller. So depending on, on what your price range, you see the different number, differing number of days of unsold inventory, to learn more about how to use this kind of data to price your house right, or if you're a buyer, how to use this data to increase your negotiating power. Give it me a call, send me a text, send me an email, don't forget to hit the like button on the YouTube, video that you're watching right here, and of course, click that subscribe button so you don't miss future videos as they happen.

Thanks for watching, bye for now.