What is an Absorption Rate?

Posted by Jace

May 13, 2008

Absorption rates give you an idea of the supply and demand in a given market for a specific time period. It is easily calculated for a given month by looking at the number of homes for sale and dividing how many actually sold that month. A balanced market (or equilibrium area) is usually determined to be around a 5-7 month absorption rate.

For example: If there are 5000 homes for sale and 500 sold in one month. The absorption rate would be 10months (5000 divided by 500).

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