The absorption rate refers to the rate at which homes are selling in a specific geographic territory or price range. It is determined by taking the total homes sold in a given time period, like a year, and dividing by a number of time units, usually months. For example, 360 homes sold in the 78704 zip code in the previous year. The absorption rate would be 360 homes divided by 12 months for an absorption rate of 30 homes per month.
See also Months of Inventory.