Absorption Rate

The Definition of Absorption Rate:

Number of weeks it takes to sell the current inventory at the present rate of sales.

The Absorption Rate is the ability of the real estate market to absorb or sell all of the houses for sale in a given amount of time. For example, if 100 homes are sold every month and there are 1200 homes for sale, it will take 12 months to sell all of the homes currently for sale. If there are 2400 homes for sale, the absorption rate will be 24 months or 2 years for all of the homes to sell, this does not take into count the number of houses which will eventually come on the market in addition to those already for sale.

If you would like to sell in 12 months, you need to take the absorption rate into account. In the above scenario with 2400 homes for sale, we know that only 1/2 of them will sell in the next 12 months. If you need to sell within the next 12 months you need to price the property in the lower 50% of the price range for similar properties in order for it to sell in the next 12 months. To sell in the next 6 months it would have to be priced in the lower 25% of the competition.

The above numbers are fantasy. If you would like more information, please contact us today!