Enter the number of homes sold and the number of homes available into the Absorption Rate Calculator. The calculator will evaluate the Absorption Rate.
- All Business Calculators
- All Rate Calculators
- Assessment Ratio Calculator
- Mill Rate Calculator
- Vacancy Rate Calculator
- Residential Density Calculator
Absorption Rate Formula
The calculator uses two related formulas depending on the mode you select.
Absorption rate mode:
Absorption Rate (%) = (Homes Sold / Active Listings) * 100
Months of supply mode:
Months of Supply = Active Listings / Average Monthly Sales
- Homes Sold: closed sales over the chosen period (1, 3, 6, or 12 months).
- Active Listings: homes currently for sale in the same market segment.
- Average Monthly Sales: homes sold divided by the number of months in the period. If you enter weekly sales, the calculator multiplies by 4.34524. If you enter yearly, it divides by 12.
- Months of Supply: how long current inventory would last at the current sales pace.
Assumptions: sales pace stays constant, no new listings are added, and the homes sold and active listings come from the same geography, price band, and property type. Mixing segments will distort the result.
The absorption rate tab gives you the percentage of inventory selling each period and converts that to a monthly rate, months of supply, and days of inventory. The months of supply tab works in reverse: you enter a sales pace directly and get the supply duration plus the implied monthly absorption rate. Both tabs return a market reading (buyer, neutral, or seller) based on the monthly absorption rate.
Reference Tables
Use these tables to interpret the numbers the calculator returns.
| Monthly Absorption Rate | Months of Supply | Market Reading |
|---|---|---|
| Above 20% | Under 5 | Seller's market |
| 15% to 20% | 5 to 7 | Neutral / balanced |
| Below 15% | Above 7 | Buyer's market |
| Sold (last 6 mo.) | Active Listings | Monthly Rate | Months of Supply |
|---|---|---|---|
| 120 | 60 | 33.3% | 3.0 |
| 90 | 90 | 16.7% | 6.0 |
| 60 | 120 | 8.3% | 12.0 |
| 24 | 80 | 5.0% | 20.0 |
Worked Example and FAQ
Example. A neighborhood had 24 closings over the last 3 months and currently has 80 active listings. The 3-month absorption rate is 24 / 80 = 30%. Average monthly sales are 24 / 3 = 8. Monthly absorption is 8 / 80 = 10%. Months of supply is 80 / 8 = 10. That points to a buyer's market with about 304 days of inventory at the current pace.
What counts as a "home sold"? Use closed (recorded) sales, not pending or contingent. Pull both the sales count and the active listings from the same MLS area and property type so the ratio is apples to apples.
Which period should I use? A 1-month window reacts fastest but is noisy. A 6-month window smooths out seasonality and is the standard for appraisals and CMAs. Use 12 months for thinly traded segments like luxury or rural land.
Why does monthly rate differ from period rate? The headline percentage covers the full period you selected. The monthly rate divides those sales by the number of months so you can compare across windows and apply the buyer/seller thresholds.
Days of inventory. The calculator multiplies months of supply by 30.4375 (the average days per month) to give a day count. Useful when supply is under one month.
Limits. Absorption rate ignores price, condition, and location within a segment. A 3-month supply at the metro level can hide a 12-month supply in one zip code. Run the numbers on the narrowest segment that still has enough sales to be meaningful (at least 5 to 10 closings).
