Absorption Rate is defined as the number of weeks it takes to sell the current inventory at the present rate of sales.
Knowing your area's Absorption Rate helps to track trends. Understanding the market and where it is headed is part of our job as real estate professionals.
Calculating absorption rate is NOT an exact science. Figuring it is based on the premise that one will be looking for a TREND. It is advised to consistently crunch the numbers each month to be able to track a trend.
Getting Starting...
You need to know 2 figures:
1) How many listings are currently on the market?
2) How many listings sold last month?
You will be counting under-contract or pendings as listings, since they are not SOLD yet.
Multiply the number of solds last month by 12 (months).
Divide that number by the current listings. This equals the # of units that would sell each week.
Divide the # of units that should sell each week into the number available. This will give you the absorption rate.
