• calendar_month January 8, 2023

Absorption Rate Analysis December 2022: “Surge” is the Word for Selling Houses in Los Angeles

 Current Real Estate, Industry, Local News January 5, 2023January 5, 2023  Seth Styles

If the end of 2022 is anything to go by, it’s certainly a happy new year for those selling houses in Los Angeles. The absorption rates for each of our neighborhoods surged deeper into a sellers market in December with the exception of one. Some of those surges were negligible. But one neighborhood made the most aggressive jump we’ve ever seen since we started tracking absorption rates. We’re talking a surge of 59 percentage points. And while that’s always a shock, the neighborhood behind it isn’t all that surprising. We also saw one neighborhood hit a seller’s market zenith we’ve never seen in our months of tracking. 

Absorption Rates – December 2022

• Los Angeles – 33%
• Glendale – 41%
• Burbank – 93%
• Northridge – 79%
• Long Beach – 73%
• Palmdale – 24%
• Encino – 29%
• Reseda – 52%
• Valencia/Santa Clarita – 57%
• Pasadena – 52%

The Absorption Rate Basics

Photo credit: Camiloarenivar

As always, we’re just going to pause for a moment to remind you how we find our original absorption rate statistics.

• We only consider houses in Los Angeles neighborhoods in our absorption rate formula. Why don’t we consider townhomes, condos and the like? Because the average JohnHart client is specifically searching for single family homes. It’s just a matter of accurate representation. 
• Countrywide, an absorption rate of 20% or more indicates a seller’s market. This means conditions favor the seller. Absorption rates of 15% or lower favor those buying houses in Los Angeles. However, these thresholds aren’t rigid rules. So, while we use absorption rate as a guide, it can’t take the place of an informed and savvy real estate professional!
• We use the universal absorption rate formula to process our statistics. For those just joining us in this monthly column, that formula is:

The Great Northridge Surge of December 2022

What is happening in Northridge? If you’ll recall, the neighborhood took a massive dive in November to a 20% absorption rate. That put Northridge at just 5% above the national threshold for a buyer’s market. 

But conditions got brutal for hopefuls of Northridge home ownership in December. That’s because the absorption rate for this neighborhood erupted by a staggering 59 percentage points. You can’t make this up. 

We’ve seen the greatest fluctuations happening in Northridge over the last five months, so it’s not a complete surprise. But a 59 percent difference is still far and away the greatest leap we’ve witnessed since tracking absorption rates. 

Will it drop back down in January? Will it surge again to give Burbank a run for its money? It’s anyone’s guess. But if there’s anything resembling a safe bet for Northridge (and there isn’t), it’s that whatever happens next will be big.

Northridge Still Can’t Come for Burbank’s Crown

Remember last month when we said the climate might not get much better for selling your home in Burbank? Well, it got better. And while the 16 percentage point spike doesn’t hold a candle to Northridge’s 59 percent surge, it’s more than enough for Burbank to hold onto the title of strongest seller’s market. 

And strong may be an understatement. Keep in mind, the highest absorption rate we’ve seen yet was back in September when Northridge hit 79%. So Burbank’s 93% absorption rate for December is jaw dropping, even when the odds are so in favor of a seller’s market. 

If you want to sell your home in Burbank, things might not get any… actually, we won’t make the same mistake twice. But let’s just say it can only get 7% better for Burbank sellers. And if you’re looking to buy a home in Burbank? Cross your fingers and get in line! 

Photo credit: Platinummedia

Long Beach is Still Being Long Beach

We don’t want Northridge’s surge to distract us from our other jumpy market; Long Beach. The seaside community is often at the center of our absorption rate news. And while Northridge may be overshadowing it this month, it still saw a pretty sizable surge. Jumping 23 percentage points, it’s still firmly in the seller’s favor at 73 percent while quite a way off from unseating Burbank. 

An End to Encino’s Buyer’s Market Streak

We hope those searching for houses in Los Angeles enjoyed two months of a rare buyer’s market in Encino. Maybe it will be back there next month, but for now, we can say it’s firmly with the sellers. After a 13 percent jump, not even close to the month’s most dramatic, Encino is now squarely in a seller’s market at 29 percent. 

Still Not a Bad Time for Buying Houses in Los Angeles

With the way absorption rates have been fluctuating over the last few months, stability may be the biggest news of all. And that unassuming honor goes to the city of Los Angeles and Palmdale with a one percent and two percent increase in absorption rate, respectively. 

Los Angeles is still in a seller’s market, but not viciously so like some neighborhoods. So, sure, it’s challenging to buy houses in Los Angeles, but not too challenging. 

Photo credit: Downtowngal

And Palmdale holds the lowest absorption rate of all our neighborhoods this month at 24 percent. No stranger to the lower end of absorption rates when stacked against our other neighborhoods, Palmdale still hasn’t claimed the lowest spot since August. 

Glendale: The Lone Dissenter

So which neighborhood had the audacity to go against the grain and drop toward the buyer’s market? Glendale appears to have marched to its own drummer in December. The coveted neighborhood dropped 11 percentage points to a 41 percent absorption rate. 

Yes, that’s still very high, but Glendale’s been a competitive spot for buying houses in Los Angeles for a while now. And maybe the drop’s a fluke. But for those seeking Glendale homes, this plummet may be refreshing news. And it disrupted the nearly unanimous citywide move deeper into seller’s territory. 

A Lot Can Happen in a Month or Two

Remember in October when every neighborhood dropped toward the buyer’s market? It seems a lifetime ago and a world away just two months later. So much can change so quickly in the LA housing market. Therefore, keeping tabs on the absorption rates of your favorite neighborhoods is a wise move. 

No matter whether you’re buying or selling houses in Los Angeles, absorption rates can tell you which way the wind is blowing. But let this also serve as a reminder that the direction could change at any moment! 

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