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Absorption rates

June 11th, 2007 · Comments · By Matt

Casey at CondoCompare blogs about absorption rates. The real meat is in this scanned table of some downtown condos.

Looks like Trio is still suffering at only 23% sold. But what is up with the negative absorption rates there and at The Parc? Is that how many people bailed on their PSA?

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  • I had meant for my previous comment to attach to the FoREM on Niche Marketing post... must have commented in the wrong tab.
  • jo
    Williams website is horrible. I have high resolution on my laptop and the thing fills up about 15% of the screen. Least they got rid of the music.
  • mhays
    I don't know what you're laughing at, Phil. Are you saying developers tend not to be well capitalized, are you confused by the term, or am I missing a double entendre?
  • You would think that condo developers would be among the first in the real estate industry to adapt to the whole web 2.0 shift in marketing.

    One look at the Williams Marketing website shows you just how outdated the entire web marketing conversation is in the condo marketplace.

    I haven't met many real estate professionals at Seattle area marketing industry events. I keep looking for Matt, but he's probably too busy to attend!
  • Phil
    "A well-capitalized developer..."

    I'm still laughing!!
  • mhays
    Parc seems to have a problem with their exterior cladding supply -- the tower is clad, but the north wing is months behind.

    Trio probably did misjudge the market for a woodframe at a noisy intersection. Their sales infrastructure might also be lacking, just a guess. On the other hand, maybe they're ok with selling most units after completion, expecting prices to be higher then.

    A well-capitalized developer can hold condos unsold for years without major worry, assuming that values trend at least a little northward, enough to cover taxes, dues, ongoing broker expenses, etc.

    I'm not terribly worried about absorption rates. The numbers seem low, but part of that is the simple absence of investment buyers and the lack of urgency among resident buyers.

    Buyers that hold off might not be helping themselves. In two years, condo prices will probably have risen a little, while rents will be much higher.
  • Dan C
    MTM Inventory change for Seattle:

    Month InvCh
    Jun-06 17.17%
    Jul-06 19.29%
    Aug-06 23.91%
    Sep-06 28.79%
    Oct-06 30.78%
    Nov-06 27.72%
    Dec-06 22.94%
    Jan-07 21.93%
    Feb-07 22.50%
    Mar-07 32.59%
    Apr-07 38.42%
    May-07 44.17%
  • Dan C
    No, absorption only takes into account units that are bought/sold/flipped. Anything that is unsold sits in inventory, which has increased something like 10+%/month for the past 8 months. Once that reaches a critical level, and demand continues to decline, you will see a serious drop in prices, along with some bankrupt developers.
  • EconE
    shouldn't absorption take into account all the units that flippers can't sell?

    I have about zero respect for condo compare as they have

    a. consistently spammed sites with their ads.

    b. are now spinning the facts with regards to absorption and inventory unless they are just including what the "fat cat developers" were able to pawn off on specuvestors. Just look at their tally for the Cosmo.
  • dan
    The Parc announced another delay in May, so I am not surprised at people backing out.
  • Dan C
    Trio seems like it has been doomed from the beginning. You are on the corner of two very busy streets, no parking anywhere for friends, small decks, wood construction, etc. (I don't know anything about the interiors though...)

    For the price, I think there are much better complexes out there that are much nicer and in better locations.
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