What is an Absorption Rate?

An absorption rate is a common metric used by real estate professionals to gauge the strength of a market. An absorption rate is the number of houses sold over an allotted period divided by the number of active listings.

Typically, I've done the math on the back end in our market updates, and I'm always giving you the absorption rate in months. When I give you an absorption rate of 1.5, that's one and a half months of inventory. If we stopped listing houses today, it would take 1.5 months to sell off the inventory based on historical data. Typically, an absorption rate under six months is a seller's market, and an absorption rate over six months is a buyer's market. Right now, we're in a strong seller's market. This equation isn't only applicable for houses for sale in Farmington New Mexico; it works everywhere!

-Bryan Crawford