Absorption rate measures how quickly homes are selling in a particular market. It is commonly calculated by dividing the number of active listings by the number of homes sold per month, producing a figure known as months of supply or months of inventory.
As a general rule of thumb, roughly six months of inventory is considered a balanced market. Less than that favors sellers, with rising prices and faster sales, while more than that favors buyers, with softer prices and longer marketing times.
Agents use absorption rate to advise clients on timing and pricing strategy and to set realistic expectations about how long a sale might take in current conditions.