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
- 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.
- 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.
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.
