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by Jace Stolfo
on Thursday, December 4th, 2008 at 11:20am.
An absorption rate is a real estate term used to give an indication of the supply and demand in the market. It is simply calculated by taking the number of homes for sale and dividing it by the monthly sales. For example, if there were 5000 homes are for sale and 500 sold in a given month, the absorption rate would be 10 months.
I calculated the absorption rates for the Ada County real estate market for the last year. I separated new construction from existing homes. Ada County is comprised of Boise, Meridian, Eagle, Kuna, and Star Idaho.
A balanced real estate market would be reflected by a 5 or 6 month absorption rate. As you can see, we still have a glut of supply that needs to be worked through.
By comparison, at the peak of the market in 2006 the real estate absorption rate was less than 3 months!
Data Source: Boise MLS (Intermountain MLS). Disclaimer: The accuracy of this information is not guaranteed. No representations or warranties are made.