How to Calculate Absorption Rate?
1. Determine the Time Period: Decide on the time frame for calculating the absorption rate. This is typically done over a month, but it can also be quarterly or annually, depending on the context.
2. Count Available Properties: Determine the total number of homes or properties currently listed for sale in the market you’re analyzing. This includes both active listings and properties under contract.
3. Count Sold Properties: Determine the total number of homes or properties that were sold during the chosen time period. This information is usually available through local real estate listings or databases.
4. Calculate Absorption Rate:
[Tex]Absorption~Rate=\frac{Number~of~Homes~Sold}{Time~Period}[/Tex]
5. Interpret the Result: The resulting number represents the average number of homes sold per month (or whatever time period you chose). This provides insight into the rate at which available properties are being absorbed by the market.