What is an absorption rate, and why should you care?

An absorption rate is a calculation that indicates how many months of inventory are remaining available in a certain micro real estate market at the current rate of properties going under contract.

The rate of properties coming on the market is just one piece of the market conditions puzzle.

Are there enough buyers for the number of properties available, or are there too many properties available? Too many properties can mean that it might take eight months or a year at the current rate of sales for the current inventory to sell. That often leads to prices softening, which would indicate a buyer’s market.

In short, you should be sure to know what is going on in your micro-market before making a move.

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