Absorption rates of new and existing homes not in sync

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While the recent new home-sales results were described as having “surged” and “soared,” NAR data showed that existing home-sales in August fell for the first time in four months.

September 29, 2014

Photo: Woodley Wonderworks/Flickr

According to BloombergView’s real estate columnist Jonathan J. Miller, these two data points offer only a one-dimensional view of the market. For a better grasp of the market, the monthly absorption rate metric, which measures the number of months needed to sell all inventory at the current sales pace, is more reliable. Based on these metrics, there is a wider gap forming between new and existing homes, with a shift toward builders developing larger homes aimed at the more affluent buyer.
 
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