ABSORPTION RATE – Is the rate at which homes are selling in a specific area.

We have calculated the absorption rate for the Kansas City metro area using the data provided by our local Heartland MLS:

THE DATA:

• 1. Time Frame = 153 days (total days from January 1, 2012 to May 31, 2012)
• 2. Number of Sold Homes = 10,595 (from January 1, 2012 to May 31, 2012)
• 3. Number of Active Homes = 14,621 (at the end of May 31, 2011)

CALCULATIONS:

• Rate of Home Sales = .0144 – 1 home is sold every .0144 days.  This number is found by taking 153/10,595 (Time Frame/Number of Sold Homes).  This is about 69 home sold per day!

• Absorption Rate = 7 months. Found by taking 14,621 x .0144 (Number of Active Homes x Rate of Home Sales) = 210.54 days = about 7 months.

What does this mean?

If the market continues at the current rate and there were no more listings, all the current inventory would be sold in about 7 months.  Experts say a balanced market’s absorption rate is typically between 5 – 7 months, so we starting to get back on track!!!  Woohoo!