Absorption Rates---Good for Hot Dog Sales and Septic Drain Fields

Cliches always catch my attention---the same way too much of an explanation makes me think I'm being lied to. Three years ago a term commonly associated with product sales was borrowed into real estate: Absorption Rate. We first heard it being used as a visual tool to show property owners why their expectations were not being met.

Realtors actually bought into this nonsense--"See Mr. and Mrs. Seller, there are 30,000 homes on the market and in the last month 4000 homes sold. With my Texas Instrument XR-7 here, I can punch in some numbers and see that 923.08 homes sell each week. Looks like you should expect to sit tight 32.5 weeks. The buyer for your home is out there, they just haven't gotten to you yet."


If absorption rates make sense for determining hot dog sales it can't be a useful tool in home sales, unless the homes we are selling are identical. Absorption rate, also known as a  percolation test or "perc test" for determining suitable ground conditions for building a septic systems drain field, is a failed tool for communicating anything logical about real estate. The picture above fails to include the fact that there is no control on houses entering the market as  houses are  "absorbed".  If the number is flawed, it becomes meaningless and if the number is meaningless, then why talk about?

We talk about it because it looks like something. The calculation looks as if there is something logical going on. And that's just it--looks.  If we were processing hot dogs we would have a good use for this calculation.  Based on sales and inventory data we can know when the weiners we made today will be sold or spoiled. 

Unless people are selecting homes by number of days on the market, absorption rate should tell a home owner nothing about how long their home may be on the market.

To see how "absorption rate" is being used by real estate brokers Google or Bing: Absorption rates madison wi real estate. I'd like to hear what you think about this.