**Contents**show

## How is real estate supply calculated?

You can calculate the months of supply **by dividing the total number of homes for sale over the number of homes sold in one month**.

## How are real estate inventory levels calculated?

Inventory is calculated **monthly by taking a count of the number of active listings and pending sales on the last day of the month**. If inventory is rising, there is less pressure for home prices to increase. In December 2020, inventory was at 1,070,000 active properties listed on the market.

## How do you calculate 6 month absorption rate?

To make this calculation: Search the MLS to determine how many transactions have closed in the last six months. **Divide that number by the number of new listing that came onto the market during the same six months**.

## How many months of inventory is a balanced market?

Generally, a balanced market will lie somewhere **between four and six months** of supply.

## What is considered a balanced real estate market?

In a balanced real estate market, there should be **around a six-month supply of homes**. When inventory supply exceeds six months, it typically means the market is starting to slow because there are more homes than there are buyers.

## What is the absorption rate in real estate?

The term absorption rate refers to a metric used in the real estate market to evaluate the rate at which available homes are sold in a specific market during a given time period. It is **calculated by dividing the number of homes sold in the allotted time period by the total number of available homes**.

## How do you calculate monthly inventory in real estate?

**To calculate the months of inventory for any given market:**

- Find the total number of active listings on the market last month.
- Find the total number of sold transactions for last month.
- Divide the number of active listings by the number of sales to determine the number of months of inventory remaining.

## Is real estate considered inventory?

Real estate can indeed be a capital asset, but often it is classified as **inventory**, which by definition is not a capital asset. Any gain on inventory sales is business income, taxed at ordinary tax rates, not capital gain tax rates.

## What is a good absorption rate?

The absorption rate compares the number of homes sold in a given period to the total number of homes on the market. An absorption rate of more than 20% is considered a seller’s market, while a rate of **less than 15%** is considered a buyer’s market.

## What is the absorption ratio?

The absorption ratio **equals the fraction of the total variance of a set of assets explained or “absorbed” by a finite number of eigenvectors**. • A high absorption ratio implies that markets are compact or tightly coupled.

## What is the formula to calculate the absorption percentage?

The absorption rate is calculated by **dividing the number of homes that sold over the given period of time by the total number of homes still for sale**.