Absorption rate expressed in units per month is calculated by:
Correct Answer
D) Dividing units sold by the number of months observed
Why this is correct: The absorption rate measures how quickly the market sells available inventory. It is calculated by dividing the total number of units sold over a period by the number of months in that period (e.g., 30 units sold over 6 months = 5 units/month). Why the other choices are wrong: 'Subtracting new listings from closed sales' calculates net change in inventory, not the rate of absorption. 'Multiplying listings by the average sale price' calculates total potential sales volume, not a rate. 'Dividing active listings by the total housing stock' calculates market share, not absorption. Exam tip: Absorption Rate (units/month) ÷ Active Listings = Months of Supply. Know this relationship.
Why This Is the Correct Answer
Why this is correct: The absorption rate measures how quickly the market sells available inventory. It is calculated by dividing the total number of units sold over a period by the number of months in that period (e.g., 30 units sold over 6 months = 5 units/month). Why the other choices are wrong: 'Subtracting new listings from closed sales' calculates net change in inventory, not the rate of absorption. 'Multiplying listings by the average sale price' calculates total potential sales volume, not a rate. 'Dividing active listings by the total housing stock' calculates market share, not absorption. Exam tip: Absorption Rate (units/month) ÷ Active Listings = Months of Supply. Know this relationship.
More real-estate-market Questions
A market-conditions adjustment should be applied to a comparable:
Building permit data is most useful to an appraiser as:
In the neighborhood life cycle, what characterizes the decline stage?
'Filtering' describes the process by which:
Under the principle of substitution, the maximum value of a property tends to be set by:
Why does an appraiser analyze the market area before analyzing the subject property?
In which phase of the real estate cycle do rising vacancies first meet a still-growing construction pipeline?
Which measure most directly signals demand strength in a housing market?
The principle of consistent use prohibits:
Frictional vacancy in a rental market refers to:
People Also Study
Valuation Principles & Procedures
25% of exam
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
Appraisal Math & Statistics
15% of exam
USPAP (Ethics & Standards)
15% of exam