The Definition of Absorption Rates:
Number of weeks it takes to sell the current inventory at the present rate of sales. Using absorption rates can help you define markets. My definition breaks down like this…
Normal Market – Between 5 and 6 months of inventory. (21.65 – 25.98 weeks)
Seller’s Market – Between 1 and 4 months of inventory. (4.33 – 17.32 weeks)
Buyer’s Market – 7 months and higher. (30.31 plus)
Now remember that absorption rates just track trends and isn’t an exact science! Here is the absorption rate trend for 2008.
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