Back during the housing market crash, we saw absorption rates of 10 or more months. In a healthy balanced real estate market absorption rates are right around 6 months.
When they are higher than 6 months we are in a buyers market and at less than 6 months a seller’s market.
The absorption rate for housing nationally is just under 2%. In the Twin Cities Metro area, we are sitting at 1.8%, and here in St. Paul, it is at 1.7% which is a very strong seller’s market.
The absorption rate computes how long it would take for all of the homes on the market to be purchased at the current rate they are being purchased.
I feel like a broken record. It is a very good market for home sellers. Buyers can expect high prices and a lot of competition. There is a shortage of single-family housing. Affordable housing is scarce.
Expect housing prices to continue to climb in 2021.