1. What Is Absorption Rate?

Absorption rate in real estate measures how quickly available properties are sold in a specific market during a given time period. It indicates the health and balance of the real estate market.

2. How Does The Calculator Work?

The calculator uses the absorption rate formula:

Where:

• \( Units\ Absorbed \) — Number of properties sold or leased
• \( Months \) — Time period in months

Explanation: This calculation shows the average number of properties absorbed (sold or leased) per month in the market.

3. Importance Of Absorption Rate

Details: Absorption rate helps determine whether a market is favoring buyers or sellers. A low rate indicates a buyer's market, while a high rate suggests a seller's market.

4. Using The Calculator

Tips: Enter the total number of units absorbed (sold/leased) and the time period in months. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good absorption rate?
A: Typically, 15-20% per month is considered balanced. Below 15% indicates buyer's market, above 20% indicates seller's market.

Q2: How is absorption rate used in pricing?
A: High absorption rates may justify price increases, while low rates may require price reductions to remain competitive.

Q3: What time period should I use?
A: Most analysts use 3-6 months for accurate trend analysis, avoiding seasonal fluctuations.

Q4: Can absorption rate predict market trends?
A: Yes, rising absorption rates often precede price increases, while falling rates may indicate market slowdown.

Q5: How does absorption rate affect inventory?
A: It helps calculate months of supply: Inventory ÷ Absorption Rate = Months of Supply.