What is Absorption Rate and why is it important?
Real estate absorption rate is the rate at which properties are sold in a given area. For example, there are currently 175 single-family homes for sale in and around Steamboat Spring (Downtown, Fish Creek, Mountain, Strawberry Park, & West Steamboat).
During December, 2010, 13 homes sold in these Steamboat Springs areas. If you take the current inventory of 175 homes and divide that by how many homes closed in December (175/13), you get 13.4 months. That means if the current inventory stayed the same – meaning not other homes were put on the market, and the rate of closed sales remained the same, it would take 13.4 months to deplete or sell the existing homes. Or an absorption rate of 13.4.