Absorption Rate - The amount of time it would take for all active inventory to sell based on the current sales pace, assuming no additional inventory came to the market.

Absorption rate is calculated by dividing the number of active homes by the number of sales in a given time period. For absorption rate expressed in months, divide the number of active homes by the number of sales over the preceding 30 days.

Example: 100 homes active on the market, 10 sales over the last 30 days = 10 month absorption rate.

Absorption rate is useful for determining market trends. An absorption rate of five- to six-months indicates a sellers’ market, while absorption rates of six-plus months indicate a buyers’ market.