Absorption Rate
The rate at which available properties are sold or leased in a specific market during a given time period. It measures how quickly the market "absorbs" inventory and is a key indicator of market health.
Absorption rate is calculated by dividing the number of sales (or leases) during a period by the total available inventory. A high absorption rate indicates strong demand (seller's market), while a low rate indicates weak demand (buyer's market). Appraisers use absorption rates in the neighborhood analysis section to support their market condition conclusions. For example, if 120 homes sold in 12 months with a current inventory of 60, the monthly absorption rate is 10 per month with a 6-month supply — indicating a roughly balanced market.
Related Terms
Market Conditions
The current state of supply and demand in the real estate market for a particular property type in a defined area.
Months of Supply
The estimated time it would take to sell all current listings at the current sales pace, calculated by dividing active inventory by the average monthly sales rate.
Days on Market (DOM)
DOMThe number of days between when a property is listed for sale and when it goes under contract.
Exposure Time
The estimated length of time a property would have been offered on the market before a hypothetical sale at the appraised value on the effective date.
More in Market Analysis
View allTime Adjustment (Market Conditions Adjustment)
An adjustment applied to a comparable sale to account for changes in market value between the date of the comparable's sale and the effective date of the appraisal.
Marketing Time
The estimated time it would take to sell a property starting from the effective date of the appraisal, looking forward.
Comparative Market Analysis (CMA)
CMAAn estimate of a property's value prepared by a real estate agent using recent sales, active listings, and pending sales data.
Broker Price Opinion (BPO)
BPOA property valuation estimate provided by a licensed real estate broker, less detailed than a formal appraisal.