What Is Absorption Rate and Why Does It Matter in Real Estate?

For investors and buyers: discover how a low absorption rate signals prime opportunities to secure properties at favorable prices.

Have you ever wondered what the absorption rate in real estate really means? Understanding the absorption rate provides useful information about the market speed and whether the market favors buyers or sellers. Which is why today, we’ll break it down for you simply and clearly What is absorption rate? Let’s say there are 100 homes for sale in your town this month. If 50 of those homes sell within the same month, the absorption rate is 50%. That’s considered a very strong market. A high absorption rate means homes are selling quickly, which usually gives sellers the upper hand. Why should you care about absorption rates? Understanding absorption rates is crucial when pricing your home. If you’re looking to sell, you’ll want to ask your realtor about the current absorption rate in your town. If the rate is high, it might mean you can price your home higher. But if it’s low, you may need to consider lowering your asking price to attract buyers. Calculating the absorption rate is simple. Just divide the number of homes sold in a month by the number of homes available for sale in that same month.

"Absorption rate tells you how fast homes are selling and how your listing will compete."
For example, if 1,500 homes sold out of 5,600 listed, the absorption rate would be 27%. In Chelmsford, with 35 homes sold out of 84 listed, that’s a 41% absorption rate. What’s the impact of absorption rates on investors? If you’re looking to buy, a low absorption rate (like 15% or 20%) indicates that homes are taking longer to sell, often 5 to 7 months. This is the perfect time for investors to swoop in and snag properties at lower prices. It’s a signal that the market favors buyers rather than sellers. What’s the local market looking like right now? In the Merrimack Valley, the absorption rate last month was about 27%. Out of roughly 5,600 homes listed, around 1,500 were sold. That’s a slower market overall. But in our town of Chelmsford, things are moving faster. The absorption rate there is 41%. That’s 35 homes sold out of 84 listed in the past month. That’s a strong market and a good sign for local sellers. Whether you're selling a home or looking to invest, understanding the absorption rate gives you insight into how fast properties are selling, and whether the market is leaning in your favor. If you have any questions about absorption rates or real estate in general, feel free to reach out at (978) 852-3001 or PBrouillette@LaerRealty.com. You can also visit our website: www.homesareus.com to learn more about us. Understanding these rates can help you make smarter decisions in your real estate journey, and we’re always here to help.