What is “absorption rate”?

Residential Sales – Selling Your Property

Absorption rate is a term used to describe how quickly stock is being sold in the housing market.

Absorption rate is found by dividing the amount of sold houses by the amount of available houses during a certain period of time. 

A market with an absorption rate of 20% or more is considered a sellers market, a market with an absorption rate of around 15% is considered a buyers market.

They can indicate how long the home will be on the market by comparing it to the rate which comparable homes are selling.

Absorption rate is used to do the following:

• Set pricing for properties
• Make accurate appraisals
• Gauge demand for new homes
• Timing the market for investment

To calculate absorption rate visit https://calculator.academy/absorption-rate-calculator/ 

As an example of absorption rate:

If there are 25,000 homes being listed for sale over a 12 month period and there are 15,000 homes being sold monthly 

Absorption rate = 10,000/25,000 = 0.4 or 40%

With an absorption rate at 40% it is clear that it is a good time to sell and would take approximately 2.5 months (25,000/10,000) to complete the sale.