• calendar_month June 7, 2023

Absorption Rate Analysis: May 2023 – Surprise! More Seller’s Favor Surges

 Current Real Estate, Industry, Local News, RE News June 4, 2023June 6, 2023  Seth Styles and Harout Keuroghlian

We hope you enjoyed last month’s drops (in all but two of our neighborhoods, anyway) closer to buyer’s territory. Because a good amount of those same neighborhoods are snapping right back up like a bungee cord, rocketing us even further into the seller’s favor. Sure, there are a couple of neighborhoods still powering on with the plummet. But if you thought the era of the seller was over, you haven’t been paying attention! Go ahead and skip past the FAQs if you’ve been here before. Otherwise, let’s answer a few familiar questions first.

Absorption Rates – May 2023

• Burbank – 64%
• Encino – 26%
• Glendale – 46%
• Long Beach – 51%
• Los Angeles – 27%
• Northridge – 44%
• Palmdale – 39%
• Pasadena – 34%
• Rancho Cucamonga – 50%
• Reseda – 49%
• Upland – 60%
• Valencia/Santa Clarita – 56%

Absorption Rate FAQS

(1.) What is an absorption rate?

The absorption rate is a statistic we (and most real estate professionals) use to attempt to gauge whether a housing market favors a buyer or seller. We say “attempt” because markets aren’t always so predictable. Especially in an area with as much market diversity as Southern California. As a general guide, an absorption rate of 15% or lower favors buyers. Absorption rates of 20% or higher favor sellers. 

(2.) Why doesn’t JohnHart factor condos and townhomes into their absorption rates?

Simple put, we feel it’s more accurate to only factor single family homes into our absorption rates. Why? Because that’s what the vast majority of our clients want. And who are we to argue? 

(3.) How do you calculate an absorption rate for a given neighborhood?

We calculate absorption rates the same way as everybody else; by using this nifty little formula:

Moving On Up in Upland

The neighborhood that sprang back the hardest into the seller’s territory in May was Upland. After falling seven points to 45% in April, it made those points back and then some with a 15 point surge. This puts Upland at its pinnacle of 2023, firmly in the seller’s camp at a 60% absorption rate. 

Burbank Sellers Can Take It to the Bank

Though Burbank is just behind Upland on surge intensity, its absorption rate jump actually has more impact. That’s because Burbank only exhibited a modest drop of two percentage points in April, putting it at a still quite lofty 51% absorption rate. 

With its rocketing 13 point increase in May, it’s now holding a 64% absorption rate. That’s not only our highest absorption rate for the month of May, but the highest absorption rate of any neighborhood we’ve seen all year. If you needed an invitation to sell your home in Burbank, this is about as clear as it’s going to get!

Back to Square One in Valencia/Santa Clarita

Photo credit: Coolcaesar

The third highest surge of the month goes to Valencia/Santa Clarita. Last month, they were enjoying the steepest drop at 12 percentage points. But in May, they lost it all, putting them right back at a 56% absorption rate (where they were in March). Oh well, we hope they enjoyed their vacation closer to the buyer’s favor. 

Plummet Party People

As we mentioned at the beginning of the blog, two neighborhoods are actually keeping April’s plunge party going. That’s not to say either of these communities are even remotely close to a buyer’s market. But every little bit counts. 

The steepest drop occurred in Rancho Cucamonga with a seven percentage point plummet for a still very high 50% absorption rate. Pasadena also took the tiniest of tumbles toward the buyer’s market with a two percentage point step down. With its 34% absorption rate, Pasadena is still in a healthy seller’s market.

The Steadiest Markets in May

Photo credit: Rennett Stowe

Palmdale seems to have skipped a turn in May, staying still at a 39% absorption rate. Likewise, Encino and Los Angeles maintained their spots closest to the buyer’s market with modest single percentage point surges. Yet, both still favor the seller with absorption rates at 26% for Encino and 27% for Los Angeles. 

Surges and Drops Are Neither Good Nor Bad

Let’s just clarify that there’s really no “good” or “bad” in a seller’s market or buyer’s market. There’s just favorability. Surges aren’t good or bad. Drops aren’t good or bad. They’re just information that we use to decide how to best proceed.

And you can still find the perfect home in a seller’s market or sell your home over asking price in a buyer’s market. That’s where your trusted real estate professional comes into play. So, if you have high hopes of purchasing a home but are daunted by all of these neighborhoods stuck in seller’s markets, take heart. Or better yet, take the number of one of our agents!