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SignUp Now!Looking at the month of May (2018) stats for Edmonton & area, there was a total inventory of 9859 residential listings. In May there were 4136 new listings, and 1776 residential sales. The absorption rate for May was roughly 18% (1776 sales out of 9859 listings.) The average (all residential) was 53 days on market leading to a sale. Keep in mind that this includes all residential (condos & detached houses), and sales vary widely by neighborhood & price point.
Getting more micro, here are 2 very different neighborhoods: Alberta Avenue versus Westmount. Both are fairly central and considered as mature areas with a variety of homes ranging from century homes to new infills.
Currently, Alberta Avenue has 85 active listings (single family - not including condos.) In the past year there have been 76 sales here. 76 sales/12 months = ~6.3 sales/month. With a residual inventory of 85 listings/6.3 sales per month = ~1.1 years of inventory (definitely a buyer's market for this neighborhood.) Your flow through rate would be 6.3 sales per month/85 listings = ~7.4% absorption rate. A 7% absorption rate doesn't give much confidence to sellers here, but tells buyers they can be picky and negotiate hard.
By contrast, Westmount currently has 27 active listings (single family - not including condos.) In the past year there have been 69 sales here. 69 sales/12 months = ~5.75 sales/month. With an inventory of 27 listings/5.75 sales per month = ~4.7 months of inventory (balanced market for Westmount.) Your flow through rate would be 5.75 sales per month/27 listings = ~21% absorption rate. a 1/5 chance of selling is fairly good odds for sellers; buyers should know to keep their negotiations tight or they risk missing out on the property they wanted in this neighborhood.
A totally different neighborhood is Skyrattler. There is currently only 1 active listing there (single family only - not condos.) There were 3 sales here in the past year. 3 sales/12 months = average .25 sales/month. 1 listing = 4 months of inventory, which is still technically balanced but closer to being a sellers market. .25 sales per month/1 listing = 25% absorption rate. Similar scenario - strong chance of selling here, and buyer have low inventory to choose from - they can decide to buy that 1 listing, or keep waiting until another listing shows up.
A downside to this metric is that it doesnt really account for the listings that didnt sell (expired, terminated etc.) Its presumed that those listing are re-listed and stay in the active inventory pile. MLS sales history also certainly doesn't capture all of the transaction history.
The other considerations are price point (way larger market for $1M homes.)
Some neighborhoods are highly desireable for families and see very few dedicated rentals/"investment properties", which also often have more expensive homes. The "really affordable" neighborhoods (such as Alberta Ave) tend to have cheaper homes, more tenants and less owner occupied homes.
Flow through rates/absorption rates are really just simple metrics looking at the health of the market in a given area. If you were to flip (or do a buy & hold) in one of these 3 neighborhoods, which are would you be most/least likley to purchase in? I know where I would choose....
Hopefully this is helpful