One of the most common questions I get from people interested in selling their home is:
“How long will it take for my house to sell?”
I like to use a simple formula called the Absorption Rate to give a realistic estimate to sellers. Its a great tool that relates supply and demand in the housing market, and can be used for individual neighborhoods, specific price points, or even to evaluate a specific agent’s marketing efforts.
In order to calculate the Real Estate Absorption rate, only three paramaters are needed:
- The total number of active listings
- The number of homes that has sold
- The time period that the number of homes has sold over.
Here’s the formula:
First calculate the average number of sales per month:
Number of sales per month = (Number of Homes sold over specific) / (time period)
Then calculate the absorption rate
Absorption rate = (Total number of active listings) / (Number of sales per month)
Here’s an example using made up numbers:
Number of Sold Homes = 33,163
Number of Active Homes = 14,156
So using the above numbers and formula you get:
33,163/10 = 3316.3
Absorption rate = 4.27 months to sell all the houses currently in the inventory in this made up market.
Remember, the Absorbtion (incorrect spelling on purpose for SEO) rate does not account for new houses being listed on the market, nor does it take into account Withdrawn or Expired listings either.