Market analysis shows 200 homes sold in the past 12 months with an average marketing time of 45 days. Currently 180 homes are listed for sale. What is the monthly absorption rate? Round to one decimal place.
Correct Answer
B) 16.7 sales per month
Average monthly absorption = 200 closed sales / 12 months = 16.6667, rounded to 16.7 sales/month. Keep the stated numerator, denominator and units distinct. Common errors: using the current listings instead of closed sales gives 15.0 sales per month; reporting the annual sales instead of the monthly rate gives 200.0 sales per month; adjusting the pace for the 45-day marketing time gives 25.0 sales per month.
Why This Is the Correct Answer
Option B is correct because the monthly absorption rate equals total closed sales divided by months: 200 / 12 = 16.6667, which rounds to 16.7 sales per month. This matches the absorption formula of total sales divided by months. The 180 current listings would be used later to compute months of supply, not absorption.
Why the Other Options Are Wrong
Option A: 15.0 sales per month
Option A, 15.0 sales per month, comes from dividing the current listings instead of closed sales: 180 / 12 = 15.0. Absorption measures sales, so the correct figure is 200 / 12 = 16.7.
Option C: 25.0 sales per month
Option C, 25.0 sales per month, comes from adjusting the pace for the 45-day marketing time: 200 / 12 x 45 / 30 = 25.0. Marketing time is not part of the absorption formula; the correct rate is 200 / 12 = 16.7.
Option D: 200.0 sales per month
Option D, 200.0 sales per month, simply reports the annual sales total as if it were monthly. The 200 sales occurred over 12 months, so the monthly rate is 200 / 12 = 16.7.
Sales over months
Absorption is how fast the market eats inventory: count what was sold and divide by how many months it took.
How to use: Use this phrase to pick the right numerator and denominator before touching listings or marketing time.
Exam Tip
Sort the given numbers into sales, listings and time before calculating; absorption uses only sales and time.
Common Mistakes to Avoid
- -Dividing current listings by months instead of closed sales
- -Reporting the annual total as a monthly rate
- -Mixing marketing time into the absorption calculation
Concept Deep Dive
Analysis
This question tests the calculation of a monthly absorption rate from closed sales over a period. Absorption is total sales divided by the number of months, so the current listings and the 45-day marketing time are distractors. Identify the sales count and the period, then divide.
Background Knowledge
The absorption rate is the rate at which available properties are sold or leased in a market during a given period. On market-conditions analyses it is computed as total sales divided by months, and months of supply is then total listings divided by that absorption rate.
Real-World Application
An appraiser completing a market-conditions analysis counts 200 closed comparable sales over the prior year. She reports an absorption rate of about 16.7 sales per month and then divides current listings by that rate to estimate months of supply.
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