We’ve seen the summer favor buyers before, but not quite like in June this year. The last time we even got close to a near-universal absorption rate drop like we saw last month was in July 2023. Back then, 10 of our 12 neighborhoods dropped closer to the buyer’s favor. But in June 2024, only a single neighborhood moved further into the seller’s favor. And that neighborhood only did so by a single percentage point. Is it the heat of the summer market? Or could this be the start of long-term relief for prospective homebuyers in Southern California?
Absorption Rates – June 2024
- Burbank – 42%
- Encino – 15%
- Glendale – 39%
- Long Beach – 37%
- Los Angeles – 21%
- Northridge – 39%
- Palmdale – 31%
- Pasadena – 33%
- Rancho Cucamonga – 37%
- Reseda – 30%
- Upland – 46%
- Valencia/Santa Clarita – 38%
Absorption Rate FAQs
For those new to our monthly absorption rate analysis, we’ll start with a few Frequently Asked Questions. Those of you who regularly join us, feel free to skip to the next section.
What is an absorption rate?
Within the context of real estate, an absorption rate is a statistic that gives us an idea of whether a neighborhood is in a “buyer’s market” or a “seller’s market.” Universally speaking, an absorption rate of 20% or higher indicates a market that favors home sellers. By those same terms, an absorption rate of 15% or below indicates favorable conditions for homebuyers. But these are more guides than hard rules.
Why does JohnHart only consider single-family homes in its absorption rate calculations?
When we calculate our monthly absorption rates, we filter out condominiums and townhouses. The reason is simple: our average client is interested exclusively in single-family homes. To paint the most realistic picture of the market based on client interests, we only figure single-family homes into our absorption rate equation.
What is the absorption rate equation?
JohnHart uses the universal formula for absorption rates:
A Small Surge is a Surge Nonetheless
Let’s look at that sole “surge” for June 2024. While most of the neighborhoods dropped down to shine on buyers, things just kept looking up in Upland. The city crawled a single percentage point higher for a significant absorption rate of 46%. That’s well within a seller’s favor and also handily beats out Burbank (at 42%) for the month’s highest overall absorption rate. So, if you’re even barely considering the sale of your home in Upland, give it some serious thought. The demand is there.
Stalling out in Rancho Cucamonga
Rancho Cucamonga didn’t surge, but it didn’t drop either. Rather, it stalled out after a couple of months of significant drops to a 37% absorption rate. That’s not exactly great news for Rancho Cucamonga homebuying hopefuls. But it’s still a far cry from the lofty 51% absorption rate the city held in March.
A Buyer’s Boon in Encino
All of the other neighborhoods on our absorption rate analysis plummeted lower toward the seller’s favor… and one may have even crossed the threshold into official buyer’s territory! Unsurprisingly, it’s Encino, who lost 11 percentage points for a 15% absorption rate, the lowest of the month. It was even lower in February so this isn’t exactly uncharted territory. But it could be a good sign for people looking to buy property in the Greater Los Angeles area. Encino is consistently one of the kindest markets for buyers.
Runner-Up Reseda
But one neighborhood dropped even more percentage points than Encino. Reseda fell an impressive 13 percentage points for a 30% absorption rate. While it still firmly favors sellers, it’s good news for anybody looking for a way into the popular San Fernando Valley community.
Hope for Homebuyers?
With so many neighborhoods dropping, can we expect permanent relief for homebuyers on the horizon? If we’re being honest, probably not. Mortgage rates are down slightly, but not enough to inspire a major wave in the seller’s favor. We likely won’t see anything like that until the Federal Reserve lowers its benchmark interest rate. But it’s also important to remember that these absorption rates are guides, not rules. And even with guides, there are always exceptions!
After working with, and for, many different real estate firms, it became apparent to Harout that there was a major disconnect between what consumers needed/wanted and the service that was being provided to them. It was upon this realization that Harout founded and opened JohnHart Real Estate; and as the CEO/Principal Broker he has continued to break from the norm and redefine real estate with an insatiable appetite to give his clients the service and attention they deserve.
