Absorption rate measures supply and demand balance in a real estate market. A high absorption rate means properties are selling/renting quickly (seller's market); a low rate indicates excess supply (buyer's market).
Absorption Rate = Units Sold (or Rented) Per Month ÷ Total Available Units × 100
For rental markets: months of supply = total available units ÷ units absorbed per month. Under 3 months of supply = strong landlord's market. Over 6 months = tenant's market with potential rent pressure.
Investors track absorption rate when entering new markets to assess rent growth potential and exit strategy feasibility.