Today, at Lezamiz Real Estate, we are discussing absorption rates in the Twin Falls and Jerome, Idaho real estate markets. We will define absorption rate, give you the formula used to find absorption rates, and provide you an example of absorption rates for properties in the Magic Valley market.
Definition
In real estate, we define “absorption rate” as the amount of time, a group of homes, listed in a specific price range, will take to sell.
Formula
The formula used to find the absorption rate in real estate is:
Number of homes listed in specific price range
(Number of homes sold Number of Months)
|
We realize this can be very confusing, so here is an example of how we figure absorption rates with our data at Lezamiz Real Estate.
Example
Twin Falls County: March- October 2008
Real Estate Listing Price Range: $160-199,999
Time Period: 6 months
Number of houses sold: 104
Number of properties currently listed: 184
1. Divide (number of homes sold in Twin Falls) by (time period- 6 months): 104/6= 17.33—This is the average number of homes sold each month.
2. Divide (number of properties listed) by (17.33): 184/17.33= 10.6 months.
3. Based upon this six month average, it would take almost 11 months to sell all 184 homes listed in this price range in Twin Falls County if no other homes entered the market.
If you are still feeling confused, don’t worry! Next week we will continue to discuss absorption rates, focusing on how they affect your decision when buying or selling real estate. Knowing how to apply the absorption rate to your situation will help it make better sense! -Lezamiz Real Estate Company