Has it already been a month since our last absorption rate roundup? September’s numbers are in and we’re seeing most neighborhoods trending upward with higher absorption rates than August. If we’re using the universally accepted 20% indicator of a healthy seller’s market, then every neighborhood but one is still a seller’s market. But as our CEO and founder Harout Keuroghlian mentioned last time around, it’s up to the professionals to really interpret what these numbers mean. There are a couple of exceptions to the upward trend keeping things interesting. Let’s take a closer look at September’s data.
Absorption Rates – September 2022
- Burbank – 41%
- Encino – 18%
- Glendale – 39%
- Long Beach – 44%
- Los Angeles – 24%
- Northridge – 41%
- Palmdale – 28%
- Pasadena – 33%
- Reseda – 30%
- Valencia/Santa Clarita – 35%
A Refresher on How We Determine Our Absorption Rates
Before we dive into these numbers, let’s just go over some key points as a refresher from last month:
- We only count single family homes. No condos. No townhouses. Why? For our clientele, it’s a more accurate representation of their interests.
- We can feasibly use absorption rates as an indicator of whether we’re moving toward a buyer’s or seller’s market. Generally, anything above 20% is considered a healthy seller’s market. Anything at 15% or below favors a buyer’s market.
- Absorption rate expressed as a percentage shows us the number of homes sold over a set period of time. This is figured using the following formula:
Are September’s Numbers Indicative of a Strong Seller’s Market?
As we mentioned, September’s numbers show the majority of our neighborhoods moving even deeper into a seller’s market. What does this mean exactly? It means that these homes are moving more quickly off the market.
In August, we didn’t see any neighborhoods dipping below the 20% threshold used to indicate a healthy seller’s market. And that trend continued into September… with the exception of one neighborhood. Encino actually dropped five percentage points for an absorption rate of 18%; just below the threshold of a healthy seller’s market. This also firmly places them as our neighborhood with the lowest absorption rate for September. In fact, Encino is six percentage points beneath the next lowest area. That would be the city of Los Angeles itself at 24% (two percentage points higher than its August absorption rate).
The Biggest Differences in Absorption Rate
Our biggest turnaround for September was a tie. Both neighborhoods in question increased a stunning eight percentage points from August. The first of these areas, Valencia/Santa Clarita, now boasts a 35% absorption rate. This makes sense since more homes were sold around Valencia and Santa Clarita while fewer homes were added to their market.
We saw another major rise in the neighborhood that held August’s lowest absorption rate. Palmdale also saw a surge of eight percentage points in September, putting the desert locale at a 28% absorption rate. It just shows you how quickly tides can turn in the current market. And, for anyone debating whether the time is right to sell, these numbers are illustrating that people will still buy in the face of higher interest rates.
One Area Trending Closer to a Buyer’s Market
But we also saw a neighborhood moving toward a buyer’s market. Admittedly, this was a less aggressive drop than the rising absorption rates we just discussed. The aforementioned Encino area earned the steepest drop with five percentage points. It was enough to net the valley neighborhood our lowest absorption rate for the month of September. While Encino is still slightly above the traditionally accepted 15% threshold for a solid buyer’s market, the data indicates it’s getting friendlier for shoppers.
The Highest Absorption Rate and the Two That Broke Even
Long Beach retained its crown effortlessly as the area with the highest absorption rate. In fact, the city took a comfortable lead over the other areas by over three percentage points.
In the heavily fluctuating housing market, two neighborhoods treaded water. Glendale remains solidly at a 39% absorption rate. However, fewer Glendale homes were sold this month, just as fewer homes entered the active inventory. Reseda also held its ground for a second consecutive month with its 30% absorption rate.
The Greater Los Angeles Area is (Arguably) a Seller’s Market
If we follow that higher absorption rates indicate more of a seller’s market, then most Greater Los Angeles neighborhoods just got more seller-friendly. But as Harout pointed out in our last Absorption Rate Analysis, parameters aren’t so cut and dry when you factor in regional influence. Ultimately, it’s up to the professionals to take the statistics for their areas of focus and interpret their specific meanings. We clearly see a strong pull in the direction of a seller’s market. But that can mean something wildly different from neighborhood to neighborhood.
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.
