Absorption Rate Analysis: July 2023 is Dropping It Like It’s Hot… Because It Is

Leave it to the hottest month on record to deliver a breath of fresh air to Southern California homebuyers. While it’s not exactly unanimous, 10 of the 12 neighborhoods we monitor dropped closer to a buyer’s favor. And we’re not talking about minor drops in most cases. One neighborhood even sank a surprising 18 percentage points! Of course, we’re coming off months of surges, so none of our neighborhoods have officially fallen back onto the buyer’s side of the fence. But most are closer than they’ve been in months! 

Absorption Rates – July 2023

• Burbank – 46%
• Encino – 20%
• Glendale – 41%
• Long Beach – 39%
• Los Angeles – 24%
• Northridge – 43%
• Palmdale – 43%
• Pasadena – 40%
• Rancho Cucamonga – 46%
• Reseda – 49%
• Upland – 45%
• Valencia/Santa Clarita – 50%

Absorption Rate FAQs

As per usual, we’ll kick things off with some FAQs for the newbies. If you know the score, go ahead and scroll down to the next section. 

What is an absorption rate?

The absorption rate is a universally accepted statistic that we use to gauge whether a market favors the buyer or seller in a given neighborhood. In the majority of markets, an absorption rate of 20% or higher indicates a market that supports a seller’s goals. Likewise, absorption rates of 15% or lower indicate ideal conditions for homebuyers. 

However, the unique housing markets of the Greater Los Angeles area consistently remind us that these numbers are simply suggestions. We can use it to take a neighborhood’s temperature so to speak. But anything’s possible out here. 

You don’t factor in townhouses, condos, etc? Why not?

Our clients have shown us that they are overwhelmingly interested in single family homes. Therefore, to paint the most accurate portrait of the housing market through a filter of their goals, JohnHart only factors single family homes into our monthly absorption rate data. 

How do you get the absorption rate percentage for a neighborhood? 

JohnHart uses the following universal formula to calculate absorption rates for the neighborhoods we most prominently serve:

A Sinking Feeling in Long Beach

Last month, we talked about Burbank “dropping it like it’s hot.” Well, now that the summer’s burned off the June Gloom, nine of our other neighborhoods are joining them. The most severe drop this month? Long Beach of all places. The coastal city absolutely plummeted 18 percentage points in the buyer’s direction. 

But after a few months of surges, this doesn’t do enough to drop the LBC to its lowest absorption rate of the year. And if we look at the later months from 2022, Long Beach is still looking on the high side. Still, if you’ve been jonesing for a Long Beach pad, a 39% absorption rate isn’t too shabby. 

Dropping or Balancing Out? 

While Long Beach doubled the second most severe drops of the month, those are still very much worth mentioning. Each sinking a respectable nine percentage points, Rancho Cucamonga, Reseda, and Upland fell toward the buyer’s zone. Yet, like Long Beach, their starting point was so high that they’re in no real danger of tipping into the buyer’s favor in earnest. Nor have any of them set a new record low. 

But if you’ll recall, it was these periphery communities that have been surging further into seller’s territory. July almost feels like a reckoning of sorts. Two more months like this (or one more month like Long Beach’s) and these housing markets might even start to appear… dare we say it… evenly balanced? 

We’d feel remiss if we didn’t mention Burbank, hot off June’s 10 percentage point plummet with July’s eight percent drop. Again, they were starting from a lofty position, so they’re still nowhere near the official buyer’s market. Or even a personal low, to be frank. But watching them course correct after their somewhat recent rocketing absorption rates is comforting. 

July’s Havens for Homebuyers

If you’re going purely by absorption rate stats, which we wouldn’t suggest without a savvy agent present, then the best neighborhoods for homebuyers were clear in July. At 20%, Encino boasts our lowest absorption rate of the month. This is still twice the number of its record low from January. But another month like this, and it will be shining indisputably on buyers.

Los Angeles proper is just ahead of it with a 24% absorption rate. Again, not a record low. But it’s beginning to become a respectable environment for homebuyers again.

We only saw two neighborhoods increase their absorption rate stats in July. And, thankfully for homebuyers, both were by a modest two percentage points. Palmdale and Pasadena increased to 43% and 40% absorption rates respectively. 

Buyers Are Still Sweating in These Markets

Palmdale is proving the market’s still hot for sellers in the desert with its slow but steady climb throughout 2023. Comparatively, Pasadena’s been more of a see-saw. It will be interesting to see whether it drops back a bit in August. 

In spite of a seven percentage point drop in July, the Valencia/Santa Clarita area holds onto enough of its lofty absorption rate to be the most firmly in the seller’s market this month. Reseda’s just one percentage point behind it after dropping nine percentage points for the second highest absorption rate in July. It will likely take a few more months like this before homebuyers shopping in these neighborhoods can stop sweating. 

The Year of the Seller? 

Next month will be a special absorption rate analysis blog. It marks a full year since JohnHart has started publicly sharing our absorption rate stats. Just glancing at the numbers from August 2022, most of our neighborhoods aren’t too far off from those absorption rates. Translation: it’s still a great time to sell your home. But the buyers are starting to get some relief. You may want to strike while the market’s still plenty hot!