Ever wonder how the ratio of for sale signs to sold strips affects the real estate market? We call this ratio the Absorption Rate—the rate at which homes sell in a given area and price point. The higher the absorption rate, the faster homes are selling. Absorption rate is calculated by taking the number of homes that sell each month divided by the total number of homes for sale.
For example, if 6 homes sell in December in Central Seattle between $800,000 and $1.2 million, and 15 homes were for sale, the absorption rate is 6/15 or 40%. If 1 home of 15 sells, the absorption rate is 1/15th or 6%. An absorption rate above 30% indicates a seller’s market in which homes are selling fast. Absorption rates below 15% show a buyer’s market, which means homes are selling relatively slowly. Everything in between is deemed a balanced market.
Information and statistics derived from Northwest Multiple Listing Service.