absorption analysis

Definition

A market study estimating how long it would take to sell all available properties in a given area at the current sales pace. Real estate developers use this to determine if building 500 new condos will flood the market or fill a genuine need.

Example Usage

The absorption analysis showed a 14-month supply of luxury apartments, suggesting the developer should pump the brakes on their new tower.

Origin

From economic terminology referring to market capacity to 'absorb' new inventory, popularized in real estate development analysis in the 1970s

Fun Fact

During the 2008 housing crash, some markets showed absorption rates exceeding 10 years, meaning it would take a decade to sell existing inventory at current pace.

Source: Urban Land Institute development standards

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punch list

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break-even point

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FSBO

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