Real Estate Absorption Rate

What is a real estate absorption rate?

Number of weeks it takes to sell the current inventory at the present rate of sales.

Real estate absorption rate is the number shows the rate at which the inventory of homes for sale are being sold. A declining figure indicates the inventory is decreasing as more homes are being sold than are coming onto the market. A rising absorption rate implies that there are more homes coming onto the market than there are buyers willing to buy at the market prices. The absorption rate lets you know how well the market is absorbing the current inventory of listings. Knowing your area's Absorption Rate, helps to track trends.

Absorption rate is NOT an exact science. Figuring it is based on the premise that one will be looking for a trend. Tracking the numbers on a monthly basis will reveal the trend.

To Get Started...

You need to know 2 figures.

    1) How many listings are currently on the market? 
    2) How many listings sold last month?

EXAMPLE:

     # of Listings:5,169 
     # of Sales last Month: 398
     # Sold 398 x 12 = 4,776 per year 
     # Sold 4778/52 = 91.84 sold per week 
     Absorption rate Number of Listings divided by Sale per week 
                        5,169/91.84 = 56.28 

An absorption rate of 26 is considered to be a balanced market, numbers lower would indicate a sellers market while numbers above 26 indicate a buyers market.

Absorption rates can be figured for an overall market or narrowed down to subdivisions.