How Can You Explain Absorption Rates to Clients?

By Josh Stern

Joshua Stern’s real estate career exemplifies strategic growth and leadership. Beginning in 2002, he leveraged the principles of The Millionaire Real Estate Agent (MREA) to build Utah’s #1 real estate team and rank among the top 100 teams worldwide.

Have you ever had a home seller fight your pricing advice? It’s not fun. But there’s a way to move the conversation from “my opinion vs. yours” to actual market science: absorption rates.

This simple concept is a secret weapon for agents who want to build trust and avoid emotional pricing battles.

Step 1: Easily define absorption rates for clients. Simply put, it’s a term that measures supply and demand in real estate. It shows how long it would take to sell the current inventory of homes if no new listings came on the market.

Here’s the quick formula:

Available homes ÷ Homes sold in the past 30 days = Months of inventory.

That number tells you if homes are moving quickly or sitting.

It also helps to look at the “activity index” or the pace of the market. That means comparing how many homes have been listed in the past 30 days to how many have gone under contract. Together, these numbers give you a clear picture of how fast or slow the market is moving.

Step 2: Use market categories. Once you know the absorption rate, you can explain the market type to your clients:

• Seller’s market (under 3 months supply): Demand is high, and sellers can often price 3% above comparable sales.
• Balanced market (3-5 months supply): The market isn’t favoring buyers or sellers. Pricing should be set right at market value.
• Buyer’s market (5+ months supply): The more inventory available, the more competitive sellers must be with pricing and condition.

For example, at a 5 to 6-month supply, a home should be in the top 30% in condition and the bottom 30% in price. At 8+ months, it needs to be in the top 10% for condition and the bottom 10% for price.

Step 3: How to use it with clients. Absorption reports are most effective when used before your listing appointment. Run the report for the whole area, but also break it into price brackets around your subject property.

Don’t mix property types. If you’re listing a townhome, don’t include single-family homes in the data and be realistic about the market. Keep in mind that million-dollar homes in Magna aren’t going to sell as quickly as starter homes, so the bracketed data must reflect that.

When you present it, keep the math simple. Share the takeaways, not the calculations. You might tell a seller:

“Right now, we have a two-month supply. That means buyers are moving fast, and you could price about 3% above comps.”

Or in another case: “With a seven-month supply, we’ll need to be in the top 20% for condition and the bottom 20% in price to attract buyers.”

These kinds of explanations set expectations early and prevent emotional pricing battles later.

Step 4: Position yourself as the expert. Most agents show up with comps. However, comps only show the past. Absorption reports reveal what’s happening right now. That makes you more than just another opinion; you become the trusted economist in the room. Clients respect data-driven guidance more than sales talk..

At Keller Williams, we’re not just talking about absorption rates but also putting them into action. On September 17 at 12:00 PM at the Keller Williams Salt Lake City office, I’ll be hosting a live training where we’ll go deeper into this strategy.

We’re developing tools that help agents turn raw market data into clear dialogue and polished presentations for clients. If you’d like to join us, send an email to headcoach@kwutahcoach.com or give us a call at (801) 252-5226 to reserve your spot.

Remember this: knowledge builds trust. And when your clients trust you, pricing conversations become effortless.