What Is an Absorption Rate?

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Welcome back once again. Today I’m going to talk about absorption rates. I’ll explain what they are, what they measure, and why they are important figures to keep an eye on. 

So, what exactly is an absorption rate? Simply, it’s a measure of inventory. The figure is found by dividing the inventory by the demand; this gives you how long it would take for all the inventory on the market to be “absorbed”, or sold. Basically, the absorption rate lets you know how long it would take to sell all the homes currently on the market if no new homes were to come on.  Here are some of the absorption rates for various cities and towns across New Jersey:

• Ocean City: 10 months.

• Egg Harbor Township: 29 months.
  

• Margate Township: 16 months.

• Sea Isle: 9 months. This is one of the strongest points on the shore right now. 

• North Wildwood: 30 months.

• Atlantic City: 52 months. This is by far the slowest moving market in the state. With over 4 years of inventory, there is a huge amount of inventory piled up, with very low demand. 

There you have it, hopefully now you have a better understanding of absorption rates and why they are an important figure when examining our market. If you have any questions about your property or your individual market, give us a call or send us an email. We look forward to hearing from you soon!