What is Absorption Rate?
Absorption Rate is a way of measuring the current state of the local real estate market. It is similar in purpose to Average Days on Market (the average number of days it is taking for properties to sell), but is better for most purposes, because it uses more relevant and timely data.
Absorption Rate is the number of properties currently on the market divided by the number of properties sold in the last 30 days (or sometimes the last month is used, even if it is not exactly 30 days). Another way to think of it is the number of months of inventory currently on the market (at the sales pace of the last month).
| Absorption Rate | = | # of Properties on the Market |
| # Sales in Last 30 Days |
Generally, an Absorption Rate of 1.8 to 3.5 is considered a Balanced Market. Less is a Seller's Market. More is a Buyer's Market.
Absorption Rate is a better indicator of the market than "Days on Market" (DOM) because:
- The data used is only 30 days old at the most, whereas DOM data spans many months, especially if it's a slow market.
- Properties that are never sold or otherwise taken off the market are not included in average DOM (it is really Days on Market of Solds only), so DOM does not really paint a true picture of the tug-of-war between supply and demand.
Current Absorption Rate in Calgary:
