Absorption Rate Calculator
Calculate absorption rate percentage from units sold/leased and total available units. Free, fast, and private.
How it works
Absorption Rate = (Units Sold/Leased in Period ÷ Total Available Units) × 100. This measures how quickly inventory is being absorbed by the market, indicating demand strength and helping predict how long it will take to sell or lease remaining units.
Example
15 units sold ÷ 100 total units × 100 = 15% absorption rate for the period.
Market Analysis
Monthly Benchmarks:
Excellent (4%+): Very strong demand, consider price increases
Good (2-4%): Healthy market absorption
Fair (1-2%): Moderate demand, monitor closely
Slow (<1%): Weak demand, review pricing and marketing
Annual Benchmarks:
Strong (25%+): Excellent market conditions
Good (15-25%): Healthy absorption rate
Moderate (5-15%): Average market performance
Weak (<5%): Oversupply or demand issues
FAQ
What is a good absorption rate for real estate?
A healthy absorption rate typically ranges from 15-25% annually, though this varies by market type. For new developments, 2-4% monthly is often considered good. Higher rates indicate strong demand, while lower rates may suggest oversupply or pricing issues.
How is absorption rate used in real estate analysis?
Absorption rate helps developers time new projects, investors assess market demand, and lenders evaluate development loan risk. It's crucial for determining optimal pricing strategies and predicting how quickly inventory will move.
What factors affect absorption rates?
Key factors include economic conditions, employment growth, population trends, interest rates, pricing relative to market, property quality and location, marketing effectiveness, and seasonal patterns.
How often should absorption rates be calculated?
Monitor absorption rates monthly for active developments and quarterly for market analysis. Weekly tracking may be necessary during critical lease-up or sales periods to adjust strategies quickly.
Can absorption rates predict market cycles?
Yes, absorption rates are leading indicators of market health. Declining rates often signal market softening before price adjustments, while accelerating rates may indicate increasing demand and potential price appreciation.