Buyer’s Market or Seller’s Market? Understanding Market Absorption Rate and Who Really Has the Power

In this episode of the Be the Solution Podcast, host Maria Quattrone breaks down one of the most misunderstood but powerful real estate metrics: market absorption rate.

Have you ever wondered why some homes sell in a weekend while others sit on the market for months?

It’s not luck.

It’s supply and demand, and understanding this data is critical for buyers, sellers, investors, and real estate professionals.

Maria explains how to calculate market absorption rates, how to interpret the data, and how this information helps determine whether the market currently favors buyers or sellers.

If you want to understand how to price correctly, negotiate strategically, and forecast market shifts, this episode is essential listening.

Key Takeaways

• Understanding Market Absorption Rate
• Pricing Strategy is Everything
• Market Data Helps Forecast Market Shifts

Best Quotes

Maria Quattrone:
“Data is only as powerful as the expert who knows how to interpret it.”

Contact / Learn More

If you want to understand the market absorption rate for your neighborhood or property, connect with me:

Maria Quattrone
 Maria Quattrone – LPT Realty
 Philadelphia, PA

Connect with Maria Quattrone:
Facebook: Maria Quattrone
LinkedIn: Maria Quattrone
YouTube: Maria Quattrone
Instagram: @maria_quattrone
TikTok: mariaquattronerealestate
Website: MQrealesate.com
Office number: 215- 607-3535

Transcript

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Who Holds The Power

Maria Quattrone 0:01

Is it a buyer's market or is it a seller's market? Quick question. Have you noticed that some homes sit on the market while others sell in a weekend? That is not by chance. That is called market absorption rate. And it tells you who has the power right now. Does the buyers have the power or do the sellers have the power? A lot of people think they just get lucky and the house sales in the weekend. There's a lot more involved in just only

What Absorption Rate Means

Maria Quattrone 0:33

that. So today what I'm going to do is I'm going to break down what market absorption rate is. And if you are a buyer, a seller, an investor, or a real estate agent, this is for you. So a lot of people I talk to all the time, they don't know what the market absorption rate is. And that's okay, that's why I'm here today to talk to you why it matters, why you need to know about it, what's involved in calculating it, and some common misinterpretations of the market absorption rate. So the information is only as good as the person who is deciphering the information and bringing it back to you. So it's really important that the person that's doing this really understands how to use it. And so when you're looking at market absorption rates, let me give you an example.

Calculating Months Of Inventory

Maria Quattrone 1:34

So let's say that you are a seller and I say, okay, I'm looking at the market sats. So what I do is I look at how much inventory is currently on the market right now. How much inventory is on the market? So how many homes are on the market right now? And if I say that there's 10 homes on the market and one home is selling per month, that means that there's 10 months of inventory that's on the market. 10 months. So what is that? So I'll say, Mr. Seller, Mrs. Seller, do you have 10 months to sell this home? And a lot of times people tell me they do not have 10 months to sell their home. So I said, okay, it's extremely important that we create a pricing and marketing strategy that makes your house the number one choice in a buyer's mind for you to be the next one sold. Otherwise, without any other homes coming on the market, it could take 10 months for your house to sell. Now, how do we even determine what that is? So we look at a market, I'll use my neighborhood, for example, as this example. So I'm in 1914, that's where my office, oops, excuse me, is located. That's where I also

Zip Codes And Price Brackets Matter

Maria Quattrone 3:04

live. And if I look at the market statistics as 19146 as a whole, there's only 2.8 months of inventory. So what does that mean? That means that homes that come on the market in the graduate hospital area, they sell pretty quickly. They sell within 2.8 months generally. That's based on the number of houses that we have available to be bought. Now, other areas of Philadelphia, let's say 19121, for example, I pulled market stats for a client on Friday for 19121. And I pulled from the price range of $400,000 to $500,000. And in that price range, there's 22 months of inventory. Of course, she doesn't want to wait 22 months. So we have to price it so that we are the most aggressive priced properly, and based on the condition, the location. So there's a lot that goes into understanding my market absorption rates. We use it for to our advantage. So let's say you are a buyer and you're looking to buy a duplex, a triplex, multifamily, whatever, any kind of property. And let's just say we use the same example.

Buyer Leverage In High Inventory

Maria Quattrone 4:30

You want to buy a property in Temple University area in 1912, and I pull the market sats and I show you in your price range between 400 and 500 that there are 22 months of inventory. What does that mean to you? That means that you have negotiating power with that seller because of the amount of inventory that is currently on the market. And it's important that this information is calculated based on price point and specific market zip code. So sometimes some of the things that happen with this is that when people look at a large area and they're not pinpointing it down to price point. So if somebody's looking in the 450 range, I would run market sats between 400 to 500. By the way, if you want more info on this or you want to know a specific area, just drop info in the comments and I'll connect with you on it. All you have to do is drop more info in the comments. And if you have any questions, you can drop it in the comments. I can see it, and I can also try to answer it more on this live today. So, what are some of the things? You think about it, when you are a seller, knowing what the expectations of the market are, and I don't think rarely do people have this conversation with sellers, how much inventory is currently on the market. That helps you to prepare to know how long it possibly could take. And this is not anything more than based on supply and demand. The more supply we have, the less homes that turn over in that area creates lack of demand. The less homes we have on the market, more demand in an area creates a faster market absorption rate. So as a buyer, if there's a lot of inventory in a particular market, you have negotiating power. As a seller, if there's a lot of inventory in a particular market, you have to get real fast. Because otherwise the house is going to become stale, people are going to think there's something wrong with it. Generally, there's nothing wrong with the house. The problem is that there's a lot of inventory in that particular area, so it's going to take much longer to absorb, unless you become the number one priced property based on location condition and price. And that is how you become the next one sold. So this is how we see market shifts.

Avoiding Misreads And Broad Averages

Maria Quattrone 7:20

We can see it early on based on inventory. I'll go back to uh when I was in the business in the early, mid, was it, it was probably the year of I started in 2004. So it's in 2006. I watched the inventory climb. And it went market wide from nine months of inventory, which is a buyer's market, to 11 months to 12 months, to 16 months of inventory. And then of course we know what happened in 2007. Well, it really happened in 2007. People think the crash happened in 2008, but 2007 is really when all the inventory came onto the market. And so you can forecast in advance if you understand the data and how to get it. So, some simple math. Let's say that a particular area has 30 homes on the market. And if two homes are selling a month, that means

Spotting Market Shifts Early

Maria Quattrone 8:23

that there's 15 months of inventory in that particular market in that price range. So it could take 15 months to absorb. That means that's a clear indication, that's a buyer's market in that neighborhood. 100% a buyer's market. Buyer has all the power. Well, if you look at another area, there's six houses on the market, one selling every month. That means for sure, that is a clear indication that that is a seller's market. There's no inventory. That means that there's less than a month of inventory in that particular area. So understanding market absorption rates is really helpful when deciding is now the right time to sell? Is now a great time to buy? It's not just what's happening in the national market or in the Philadelphia

Step-By-Step: Pulling The Data

Maria Quattrone 9:14

metro market, it's what's happening in each individual neighborhood. We could look at some neighborhoods and, for example, Narburh or Ardmore, very little single-family inventory there, houses sell pretty quickly, try to find something that's brand new there, that's under a million, doesn't exist. So really understanding how market absorption works, how you can use it to your benefit. I am happy to talk to you more about this. You can just drop more info in the comments, and I will connect with you. So, today we learned that market absorption rate is the number of homes sold in a period of time divided by the number of houses that are available, which gives you what the absorption rate is. In the MLS, you go to market statistics, and the bottom part, you can put in the zip code, or you can look at the whole market. You can pull the Philadelphia Metro Market, you can pull Philadelphia County, you can pull Delaware County, you could pull Bucks County. I like to pull it market wide and then by price point. So I'll this is how I pull it. First, I pull Philadelphia County, and I will do $10,000 to $99 million. I'll do the whole thing. I want to see the whole entire picture. Then I'll pull Philadelphia County by price point. So I will pull it by $100 to $200, $200 to $300, $300 to $400, $400 to $500, and then I'll pour $5 to $750, $750 to 1.250, 1.250, 15. You get the idea. I pull it in price brackets of how people will search for homes. And then that's a lot of data. But this is what I do to understand as an expert what is happening in the Philadelphia market. So I pull all that. Okay, so I pull it by the whole market, Philadelphia, in this case Philadelphia County. Then I break it up into Christpoint. And when you're running this report, when you are running this report, you have to put in a year time frame. So right now it's February. So what I can pull is from January 2025 through January 2026. Okay? That is how you have to put it in there. So you go up to the top and the left side, and you pull January to January. You need one year to get the complete picture. And it breaks it down by month. So we have that. We've been in our area that one in this case, Philadelphia Accounting, because we're going to look holistically first. We're going to look at the entire price ranges from 10,000 to 99 million. And then we're

Why You Hire An Expert

Maria Quattrone 12:36

going to break it up into segments about how buyer search. So you're going to have like 15 pieces of paper. I print everything out too. One by one, print, print, print, print. And then all over the conference table. Then I'm going to pick my core zip codes that I work in. 19146, 19147, 1913, 19103, etc. And I'm going to pull each zip code, the entire thing, again, 10,000 and 99999. And then I'm going to pull it by the price point. This is a lot of data. This is why you hire an expert to do this so that we understand 100% how you and your property fit into this. Whether, is it a good time to sell right now? And if you have to sell, I don't know if it's a good time. But now we position it because we know the information to be able to provide to you. You know, you can't just go to Zillow to find this. That's why you hire the expert. And then we decipher the information so we could bring it back to you. Okay? So if you want more info on this and in your particular area, or just want to know more about this, just drop in there, more info, and I will reach out to you. But so here are the things that we learn today. It's data, data, data. How do you know the data? And you can learn very quickly in any particular area in anywhere in the country. Is it a buyer's market? Is it a seller's market? It is it is it to invest in this particular area. Those are all the things and the discussions that we have with you when we work with you. So I primarily am a listing worker, I focus on delivering sellers the results because I have the data, I have the knowledge, and I've spent over two decades studying this stuff.

Weekly Lessons And Next Steps

Maria Quattrone 14:37

So, in wrapping up, I want you to know this. Every Monday at 10 a.m. I will be delivering you a message. I'm going to be teaching you something about real estate. And this week, it was all about market absorption rates. I know that this is a lot to absorb. So re watch it, share it with a friend, and drop in the comments if you want more information. And I look forward to hearing from you. And let's all have a great and fantastic week. God bless.