Absorption rates can be described as the number of months needed to sell the available inventory at the rate of sales experienced in the previous 12 months IF no additional properties were listing during that time.
So, given the 'normal' rate of sales that have occurred over the previous 12 months, and given the number of homes on the market currently, how many months it would take to sell everything that is currently available is known as the absorption rate. We generally say that anything below 7 months supply is 'healthy'. The absorption rate can be a general rate for a town, for instance, for all single family homes in that town, or it can be more specific and related to price ranges.
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