Understanding Absorption Rate

Understanding Absorption Rate



absorption rate is the rate at which homes sell in a given area over a given time period it's calculated by dividing the number of available homes by the average number of homes sold each month absorptions rates do not include additional homes that are put up for sale during the analyzed time period say a market with 1,000 homes for sale sees 100 sold in the first month assuming that rate remains steady the markets absorption rate is ten percent and its current allotment of available homes will be exhausted in 10 months or put another way there's currently a ten month supply of homes available on the market appraisers use absorption rates to determine overall home values in a market the absorption rate provides homeowners and their agents with an idea of how they should price their offerings and how long they are likely to wait for a sale in short it tells them how aggressive to be with pricing and marketing even though the rate should not be seen as a guarantee it's basically an estimate higher absorption rates indicate homes are selling fast and the market favors sellers lower rates means homes are selling slowly and supply exceeds demand which favours the buyers absorption rates also tell developers when they should start building new homes

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