Absorption rate

Sam · Last edited by Sam on Wed Oct 18, 2006 6:00 pm

Absorption is a measure of the net change in occupied space from one period of time to another. The absorption rate is a numerical figure calculated by dividing the change in space by the occupied area at the start of the time period.

The absorption rate is expressed as percentage. It gives an idea about the number of properties bought, sold or offered for lease in a particular market.

Guest 0.10 Dollars($)

Also the absorption rate gives an indication about the time period the average home takes to sell in a specific market.

Thanks

jameshogg · Posted: Tue Oct 17, 2006 3:42 pm Post subject:

Hi,

Let me give one example to make it clearer what Sam and Philippe have mentioned on how the absorption rate is calculated.

For calculating the rate, the total number of listings of homes is to be divided by the no. of sales during a month. Let us suppose, there are 400 listings and a total of 200 sales, then the absorption rate comes to 2 months. When the absorption rate goes high to five or eight months then it means the homes take longer to sell and buyers are lot more selective in their purchase.

Thanks

Guest 0.10 Dollars($)

Hi,

It can also be used to show the expected absorption rates. Like a development is built by a person or concern and it is expected that it will take around 20% of the market and if the demand for new homes in that area is 300 per year then the absorption rate for the new development would be 60 homes annually.

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