ABSORPTION RATE – Is the rate at which homes are selling in a specific area.
You may find these articles on this market metric helpful:
(warning, these link outside of the Knowledge Base)
- Absorption Rate Key to Successful Pricing (REALTORMag)
- What Is Absorption Rate in Real Estate and Why Is It Important? (Huffington Post)
- Months Supply of Inventory and Absorption Rates in Real Estate (Drew Kondo)
- Real Estate by Numbers: What Every Home Buyer & Seller Should Know (PDF by Jim Papillo)
Using REsearch to locate the numbers needed-
The fasted way to calculate the # of sold and currently active listings would be to use the Count feature:
Sales Per month = Total number of Sales of a 12 month period ÷ 12 (months)
Ex: 489 ÷ 12 = 40.75 Sales Per Month
Months of Inventory = Total Active Listings ÷ Sales Per Month
Ex: 388 ÷ 40.75 = 9.52 Months of Inventory
Absorption Rate = Sales Per Month ÷ Active Listings
Ex: 40.75 ÷ 388 = 10.5% Absorption Rate
*It is recommended that you also include Contingent listings along with active listings when performing your count. Under Contract and Preview listings are generally not included.
*It is also recommended that you use the twelve completed months prior to the current period.
*Months of Inventory
|5-7 Months||Generally referred to as a “balanced Market”|
|Less than Five Months||Generally referred to as a “Seller’s Market”|
|Greater than 7 Months||Generally referred to as a “Buyer’s Market”|