Absorption Rate Calculator

Enter homes sold, time period, and active listings to see market conditions.

Market condition guide

What absorption rate measures

Absorption rate is the rate at which available homes sell in a given market over a defined period. When expressed as months of supply, it tells you how long the current inventory would last at the current sales pace if no new listings came to market.

How appraisers use it

Appraisers are required to analyze and report market conditions on the URAR (1004 form). Months of supply is a primary metric for determining whether a market is increasing, stable, or declining -- which directly affects value trends, time adjustments, and overall market conditions analysis.

Fannie Mae requirements

Fannie Mae requires appraisers to comment on supply, demand, and marketing time. Significant changes in months of supply within the prior 12 months must be disclosed and can affect whether a market is classified as declining, which triggers additional lender requirements.

Using a consistent geographic area

For meaningful results, apply a consistent geographic boundary (neighborhood, zip code, subdivision) and use the same period consistently. Fannie Mae guidance typically recommends analyzing a 6-12 month period to smooth seasonal variations.

What is a good absorption rate?

In a balanced market, months of supply typically falls between 4 and 6 months. Below 3 months indicates a strong seller's market with rising prices and competition. Above 9 months indicates a buyer's market with downward pressure on prices. The "right" number depends on your specific market and property type.

How do appraisers calculate absorption rate?

Appraisers count sales within a defined geographic area over a defined time period (typically 6-12 months), divide by the number of months to get a monthly sales rate, then divide current active listings by that rate to get months of supply. This calculator automates those steps.

What is months of supply?

Months of supply is the number of months it would take to sell all currently active listings at the current monthly sales pace, assuming no new listings enter the market. It is calculated as: Active Listings / Monthly Absorption Rate.