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:
- 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)
- 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!