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What is an absorption rate?

By in Colorado Springs Homes

Absorption rates are very handy in determining how a certain market is doing and giving an idea how long an average house will take to sell.  Absorption rates are determined by a simple formula of the number of homes for sale on the market divided by the number of homes sold in a month, week etc.  For example a monthly absorption rate in a market with 100 homes for sale, that sold 10 homes over the last month would yield a 10 month absorption rate or it would take 10 months to sell all of the inventory of houses on the market.

When pricing a home to sell with the above scenerio, if you wanted to sell a home within 5 months you would need to be priced in the lower 50% price range of homes, if you wanted to sell in 2.5 months you would need to be priced in the bottom 25% of the homes for sale.

Another indicator given by an absorption rate is what kind of market we are in.  Absorption rates that yield 7 months or above are typically defined as a buyers market, where 1 to 4 months are considered a sellers market and 5 or 6 months is considered a balanced market.

If you would like a free absorption rate for your Colorado Springs neighborhood, please contact Patricia.

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