Formula for Absorption Rate
The formula for calculating the absorption rate in real estate is straightforward,
[Tex]Absorption~Rate=\frac{Number~of~Homes~Sold}{Time~Period}[/Tex]
Typically, the time period used for calculating absorption rate is one month, but it can also be calculated over other time frames such as quarterly or annually, depending on the preferences of the analyst or the specific requirements of the market being analyzed.
Example:
If 50 homes were sold in a particular market over a three-month period, the absorption rate would be,
[Tex]Absorption~Rate=\frac{Number~of~Homes~Sold}{Time~Period}[/Tex]
[Tex]Absorption~Rate=\frac{50~Homes}{3~Months}=16.67[/Tex]
This means that, on average, approximately 16.67 homes are being sold in the market each month over the specified three-month period.