Definition
The rate at which available homes sell in your market, indicating how quickly homes are moving. Absorption rates help predict market direction and competition.
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Absorption rates are expressed in months of inventory (e.g., 5-month absorption rate means inventory would sell in 5 months at current sales pace). Higher absorption rates indicate strong demand and typically predict rising prices, while lower rates suggest weakening demand. Absorption rates are useful for forecasting market trends.
Pro Tip
Track absorption rate trends to predict market direction. Rising rates indicate tightening inventory and increased competition.
Example
With 150 monthly sales and 600 active listings, the neighborhood had a 4-month absorption rate, indicating a moderate seller's market.