The Secret to Pricing Homes Like a Pro: Absorption Rates Explained

Right now, listings are sitting on the market longer than we’ve seen in years. Inventory is up 44% year-over-year, with over 13,000 active listings; more than at any point in the last 15 years. Every day a property stays on the market is like taking money directly from your client’s pocket.

That’s why now, more than ever, pricing needs to be based on data and local market economics, not gut feeling. The skill that sets top agents apart? Understanding and applying absorption rate reporting, which I call science-based pricing.

Step 1: Understand supply and demand. All economies run on supply and demand, and real estate is no different. In the 2020–2021 “unicorn years,” low supply and high demand drove prices up quickly. Today, supply has grown, and homes are taking longer to sell.

Here’s how the month’s supply of homes defines the market:

● Less than 3 months: Seller’s market – price aggressively.

● 3–5 months: Balanced market – price at market value.

● More than 5 months: Buyer’s market – sellers must be competitive.

But here’s where many agents get it wrong: they only count active listings. The real inventory includes actives, actives with no-show status, under contracts, and backups. This number, divided by the homes sold in the last 30 days, gives you the true month’s supply.

Step 2: Adjust pricing to market conditions. Once you know the month’s supply for a specific neighborhood, price range, or property type, you can set a clear strategy:

● 5–6 months supply: Top 30% in condition, bottom 30% in price.

● 6–8 months supply: Top 20% in condition, bottom 20% in price.

● 8+ months supply: Top 10% in condition, bottom 10% in price.

When you walk into a listing appointment and say, “Based on our current six-month supply in your price range, here’s exactly how we need to position your home,” you instantly establish credibility.

Step 3: Look forward, not just backward. Month’s supply shows where the market stands right now, but it’s just one part of the picture. You also need to understand where the market is headed.

To do this, compare the number of new listings added in the last 30 days with the number of pending sales during the same period.

If more homes are being listed than going under contract, inventory will continue to grow, and sellers will face increasing competition. Pair this information with the average days on market for active listings compared to those that recently went pending.

For example, if pending homes are going under contract in just 10 days while your listing has been sitting for 35 days, that’s a clear sign the market has moved on and your property isn’t keeping pace.

Step 4: Build your advisory system. Run absorption reports weekly for your farm area. Break them into price brackets; everything above a certain point is your “capstone,” everything below is your “foundation,” with smaller brackets in between. Save every report. Over time, you’ll see trends and give clients advice grounded in actual market shifts, not hunches.

Step 5: Lead with data, not hope. Knowledge earns trust. While other agents guess, you’ll walk in with hard numbers. In a shifting market, the agents who thrive are those who can explain the why behind the price.

Remember: In a shifting market, the agents who succeed are the ones who lead with data, not hope.

If you want to master absorption rate reporting and start using it to win listings and get homes sold faster, join one of my in-person training events or book a one-on-one call. Just email me at headcoach@kwutahcoach.com or give me a ring at (801) 252-5226. I’ll walk you through building your own reports and show you how to use them in your daily business.