I hope this helps explain absorption rate in real estate market stats. I found this on the internet felt it was a good:
ABSORPTION RATE is the mathematical representation of the relationship between supply and demand. The total amount of available product is divided by the total amount of product sold in the previous month. The resulting number represents the number of months it would take, at that same pace, to sell the entire inventory of product.
"Normal Market" conditions exist when the Absorption Rate is between 5 and 6 months.
"Sellers Market" conditions exist when the Absorption Rate is lower. (1-4 months)
"Buyers Market" conditions exist when the Absorption Rate is higher. (7+ months)
Here is a (fictitious) example:
- Anytown, USA has 252 homes currently on the market.
- In the past month, 78 homes sold
- 252 / 78 = 3.23
- This would be a Sellers Market, but is approaching "normal" conditions.