It almost feels like March is an apology to the prospective homebuyers of the Greater Los Angeles area for February’s unanimous surge into the seller’s market. It was mostly a kinder month for the buyers, showing drops closer to the buyer’s market in all except four of these communities. And two of those just treaded water. As for the two areas that forged onward even deeper into the seller’s favor, they did so modestly. The highest jump in March was a mere two percentage points! Is this the swinging checkered flag of the spring buyer’s season? Or are the engines still warming up?
- Burbank – 34%
- Encino – 15%
- Glendale – 42%
- Long Beach – 37%
- Los Angeles – 22%
- Northridge – 26%
- Palmdale – 28%
- Pasadena – 34%
- Rancho Cucamonga – 36%
- Reseda – 41%
- Upland – 39%
- Valencia-Santa Clarita – 25%
These are the numbers we’re working with in March. But before we get down to the nitty-gritty, let’s run through some quick FAQs.
Absorption Rate FAQs
What is an absorption rate?
We use a statistic called an absorption rate to estimate whether a market favors the seller (seller’s market) or buyer (buyer’s market). It’s generally accepted around the world that an absorption rate of 18% or higher tends to indicate a seller’s market, meaning conditions favor the seller. Likewise, absorption rates of 15% or below are considered a buyer’s market. However, there are always exceptions to the statistics, as the volatile markets of Greater Los Angeles prove time and time again.
Why does JohnHart only factor single-family homes into monthly absorption rates?
We’ve crunched the numbers and, time and time again, found that our clients have an overwhelming interest in single-family homes. Therefore, we feel that adding townhomes and condos only muddies the results. To give the picture most accurate to our client’s interests, our absorption rate analysis solely focuses on the single-family home markets.
How does JohnHart calculate absorption rates?
We employ the same universal formula anyone uses to calculate absorption rates:
Guess Who’s in the Spotlight (Again)
If you’ve been following our absorption rate analysis for a while, you may have noticed that Northridge rarely gives us a dull moment. So, it should come as little surprise that Northridge is where the biggest drop took place in March. Only predictable in its unpredictability, Northridge plunged a jaw-dropping 25 percentage points, basically cutting its February absorption rate in half. This lands the Valley community at a 26% absorption rate for March… good news for buyers, but knowing Northridge, it will be short-lived. It’s definitely not a market that rewards waiting.
On any other month, Rancho Cucamonga’s 10 percentage point drop would be a bigger deal, but it’s hard to follow Northridge’s dive. With the second most dramatic plummet of March, Rancho Cucamonga settles at a 36% absorption rate.
A Little Goes a Long Way
As we mentioned, the surges for March were drops in the ocean by comparison. Reseda had the steepest increase, but that was a meager 2 percentage point hop to a 41% absorption rate. But a little is all Reseda needed to secure its spot as the second-highest absorption rate for March. Palmdale exhibited the most modest of increases, with a single percentage point increase, bringing the desert community to a 28% absorption rate.
We also had two communities staying the course with no change in their absorption rates since February. These were Upland and Glendale, holding strong at 39% and 42% absorption rates, respectively. Interestingly, Glendale took the highest absorption rate in March by simply holding its ground.
Encino Comes Home. No, It’s Other Home.
So, which community walks away from March with the lowest absorption rate? Predictably, it’s Encino with a 15% absorption rate after its 8 percentage point drop. This plants the Valley neighborhood right at the gateway for the universally accepted buyer’s market. But at this point, Encino pretty much has dual citizenship in both markets. Though it toured the seller’s market in February with a 23% absorption rate, it was at a 12% absorption rate in January. So March sort of feels like another homecoming for Encino.
Make Your Plan
What does this all mean for you? Well, if you’re looking to buy property in any of our neighborhoods, it’s time to reach out to one of our agents and formulate a plan. Spring gets competitive, and you’ll need all the help and support you can get. And if you’re on the fence about listing? We’re still in a market that typically favors the seller, regardless of a strong month for sellers. Consider a free evaluation and, if you like what you see, reach out to us!
