Definitions
Absorption Rate
This is a measurement of how quickly available real estate inventory is purchased and helps identify whether the inventory is growing or shrinking. The percentage is calculated by dividing the number of listings sold by the number of listings taken. A percentage above 50% means more homes are sold than listed (inventory is shrinking). A percentage below 50% means more homes are listed than sold (inventory is on the rise). You can view Wilmington’s current absorption rate here.
Market Types
The real estate industry has three types of markets: Buyers, Transitional/Balanced and Sellers.
| Buyers Market: | When there are over 7 months of listing inventory available. |
| Transitional/ Balanced Market: |
When there are 5-7 months of listing inventory available. |
| Sellers Market: | When there are less than 5 months of listing inventory available. |
Inventory Level
Listing inventory is calculated by dividing the current number of listings by the number of listings sold over the past three months and then multiplying that number by three to receive the amount of months it would take to sell off all current inventory at the current selling pace.
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Can you give me an example of calculating inventory level?
Comment by Inquiring Mind — July 3, 2007 #
Sure. If there were 100 homes available and 25 homes sold over the past three months, then… (100/25)*3 = 12 …there would be 12 months of inventory available. Another way of putting it is, if it take three months to sell 25 homes, it would take 12 months to sell 100.
Comment by FCL — July 3, 2007 #
Question on the absorption rate: “listings taken” - are you saying new listings that came on the market or the overall current inventory at the time?
Comment by waltdowdy — December 19, 2007 #
Hey Walt. “Listings taken” refers to the number of new listings that came on the market. Thanks for asking!
Comment by FCL — December 19, 2007 #