Definition

Absorption rate is a measure of how quickly a real estate market absorbs the available housing inventory. It is calculated by dividing the number of homes sold in a given period of time by the total number of homes available for sale. The absorption rate is expressed as a percentage and is used to determine the health of a real estate market.

 

Importance

The absorption rate is an important indicator of the health of a real estate market. It provides insight into the demand for housing in a given area and can be used to predict future trends in the market. A high absorption rate indicates that the market is healthy and that there is strong demand for housing. A low absorption rate indicates that the market is weak and that there is a lack of demand for housing.

 

Example

For example, if there are 100 homes available for sale in a given area and 20 homes are sold in a month, the absorption rate would be 20%. This indicates that the market is healthy and that there is strong demand for housing in the area.

 

Table

Absorption Rate – Description

A measure of how quickly a real estate market absorbs the available housing inventory.

 

Calculation

Number of homes sold in a given period of time divided by the total number of homes available for sale.

Expressed as Percentage

 

Key Takeaways

 

Conclusion

The absorption rate is an important indicator of the health of a real estate market. It provides insight into the demand for housing in a given area and can be used to predict future trends in the market. A high absorption rate indicates that the market is healthy and that there is strong demand for housing, while a low absorption rate indicates that the market is weak and that there is a lack of demand for housing.