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Absorption Rate
The rate at which available properties are sold or rented in a market over a given period.
Definition
Absorption rate measures how quickly homes are selling or units are being leased in a specific market. It is calculated by dividing the number of sales (or leases) in a period by the total available inventory. A high absorption rate indicates strong demand and a seller's/landlord's market. A low absorption rate signals excess supply and a buyer's/tenant's market. Real estate analysts use absorption rate to forecast how long current inventory will last and to predict price or rent trends. For investors, absorption rate helps assess whether a market can support new inventory and how quickly a vacant property is likely to lease.
Related Terms
Vacancy Rate
The percentage of time a rental property is unoccupied and not generating income.
Days on Market
The number of days a property listing has been active before going under contract.
Market Rent
The rental rate a property would command in the open market based on comparable rental properties.
Fair Market Value
The price a property would sell for on the open market between a willing buyer and seller.
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