Absorption Rate of Condo Sales
A quick and dirty way to understand what’s going on in any given real estate market is to look at absorption rate. It is essentially a number that tells you how many months it will take to sell out the current inventory on the market (assuming it is calculated on a monthly basis). Absorption rate is especially informative when comparing surrounding areas to each other. For example, Hoboken and Jersey City.
Looking at the 1 year period from January 31, 2007 through January 31, 2008 there were 650 sales of Hoboken condos on the MLS. Divided by 12 equals about 54.17 sales per month. As of the end of January, there were 321 active condos in Hoboken. So at 54 a month, it would take 5.9 months to sell out.
Downtown Jersey City:
During the same period there were 473 sales of downtown JC condos. That’s about 39.4 per month. At the end of last month there were 303 active properties. So there is about a 7.7 month supply of condo inventory in downtown JC. Again, that does not include any new construction. So it’s 5.9 vs. 7.7. That, together with an understanding of where the most new construction is happening, may help you decide where to put your money if you’re buying and what to expect if you are trying to sell your condo.