- calendar_month December 5, 2023
- folder RE News
Last month, we talked about the calm before the storm. Well, we wouldn’t ring the alarms just yet, but November gave us a bit more drama than October with some decent rises and falls across the Greater Los Angeles area. It’s a surprising amount of absorption rate activity for a time when the market is allegedly hibernating. We’ll get into the highs and low in a moment. But first some FAQS…
Absorption Rates – November 2023
- Burbank – 32%
- Encino – 25%
- Glendale – 42%
- Long Beach – 42%
- Los Angeles – 21%
- Northridge – 35%
- Palmdale – 23%
- Pasadena – 39%
- Rancho Cucamonga – 53%
- Reseda – 46%
- Upland – 38%
- Valencia/Santa Clarita – 37%
The Big Absorption Rate FAQs
If this is your first time visiting our absorption rate analysis, we’re sure you have questions. Here are the answers:
What is an absorption rate?
We use a figure, known as an absorption rate, to determine whether a specific neighborhood’s housing market favors buyers or sellers. It’s universally accepted that anything over a 20% absorption rate indicates a seller’s favor. An absorption rate of 15% or less is said to favor the buyer. However, these are guidelines and not rules… and they’re bending all the time.
What’s up with JohnHart not factoring condos and townhouses into its absorption rates?
It may seem inaccurate to omit data. But at JohnHart, we choose not to include condos and townhouses into our figures because its not indicative of the average JohnHart client’s interest. The majority of our clients are very specifically interested in single family homes. By choosing to exclude condos and townhouses, we create a more accurate picture of those interests.
How do you calculate an absorption rate?
By using this universally accepted formula:
November’s Big Desert Drop
It’s glaringly obvious that location had everything to do with market behavior in November. This was no May 2023 when all but two neighborhoods surged. Nor is it July when all but two neighborhoods plummeted. In November, five of our communities fell closer to the buyer’s market (without officially breaching it) and seven communities climbed deeper into seller’s territory.
November’s biggest gift to the buyer’s market happened in the desert community of Palmdale. There, the absorption rate dropped 8 percentage points down to a 23% absorption rate. This is actually staggering considering it’s been almost a year since Palmdale’s absorption rate fell this low. It was December 2022 when Palmdale saw anything below 20% (back then, they clocked in at 19%). It’s a notable drop, though nothing like August’s 11 percentage point plummet.
Record Breaking Absorption Rate at the Valley’s Edge
Burbank and Northridge also shared significant drops to tie for the second most dramatic plunge of November. With each neighborhood lowering by 6 percentage points, they’re now holding at 32% and 35% respectively. So, no clear reason for the buyers to pop any corks.
Photo credit: Junkyardsparkle
Yet, considering Burbank was at 64% in May and Northridge was at 47% in March, it is refreshing to see these neighborhoods in the 30s with their absorption rates. In fact, 32% is the record low for Burbank since we’ve started sharing our numbers. Still not sure if that’s worth celebrating, or just sobering for Burbank-home hopefuls. In any case, it should be giving prospective Burbank sellers something to seriously think about.
How Low Will LA Go?
Despite these noteworthy drops, none of the above neighborhoods boasts November’s lowest absorption rate. That honor goes to Los Angeles proper which drops down to a 21% absorption rate. It’s not exactly new territory for the city which tends to hover in the 20-percentile range.
High Life in the Foothills
The biggest absorption rate gain for November occurred in a neighborhood where the sellers certainly don’t need the extra help. Rancho Cucamonga surged upward by 8 percentage points for a total absorption rate of 53%. The leap helps Rancho Cucamonga secure the highest absorption rate of November.
Photo credit: California.com
Shockingly, this isn’t the high for Rancho Cucamonga. That would have been 58% back in March. Will the community end the year by surpassing that number? Prospective buyers certainly hope not.
What a Difference Five Miles Can Make
Reseda and Encino tied for the second most dramatic jumps in November, each with a 6 percentage point bump. This brings Encino to a relatively low 25% and Reseda to a relatively high 46%. Interesting how, less than five miles away in the same valley, conditions can be so dramatically different.
This could be an uncommonly volatile winter with so many changes happening in the real estate industry. Therefore, we wouldn’t be surprised if December’s numbers buck a trend or two. Regardless, it’s still a great time to begin planning your next move since, as November illustrates, this market doesn’t wait for anyone! Make a list of your needs and wants and give your agent a call to see what’s possible!
