Real Estate Math Understanding Market Statistics

Today, the Tulsa World published an article about the Tulsa real estate marketing is heating up. In that article, they reference several common real estate math terms to describe what is happening in the real estate market. As a future real estate agent, you will need to be familiar with these terms and statistics in your area. In this post, we will focus on the real estate math term “absorption rate”.

The article says:

Prices are up significantly to an average of $163,368, the inventory of homes on the market has shrunk to 10.2 months, and contracts to sell continue to remain high month after month.

When we talk about the inventory of homes, we are really talking about absorption rate. The absorption rate is calculated by a two-step process. First, we determine the average number of sales per month. Essentially, this is the number of homes “being absorbed” each month. Second, we determine how many active listings there are currently on the market. This is the number of homes that “need to be absorbed.” By dividing the number of homes that need to be absorbed (i.e., active listings by the number of homes being absorbed (i.e., monthly sales), we can get the absorption rate.

Check out our latest Real Estate Math in a Minute on this topic:

The other real estate terms that you should be familiar with include: monthly sales, new listings, YoY (Year over Year) statistics, and MoM (Month over Month) statistics. Thankfully, you probably will not have to calculate these yourself (although you should know the real estate math behind these calculations!). Most MLS providers also have services that will aggregate and calculate these statistics for you.


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