The market is based on a number of pieces of information. Inventory is the number of homes on the market. This varies over the year. The lowest number of homes is typically at the end of the year. The highest in the summer.
If you know what inventory levels are doing, and whether or not that is the norm for the season, then you will have an idea about where the market is going. If inventory levels are increasing in November, this would indicate that the market is not acting in a normal fashion. Normally inventory decreases at the end of the year. If inventory levels are increasing and the number of sales are decreasing, then the market is slowing down. If these numbers are changing more dramatically than normal, then the change will be more dramatic.
Increasing inventory increases the competition for buyers. If there is one home for ten buyers, the seller is going to get a better deal. If there are ten homes for one buyer, the buyer is going to get a better deal.
If inventory levels are stable, and the number of sales are increasing, then the market is speeding up. Better yet, if inventory levels are declining and the number of sales are increasing, the market is really picking up speed.
DOM is the number of Days On Market of the property. CDOM is the Continuous Days On Market. DOM should be consistent through one listing, however, if the property is relisted or moved to a different brokerage, then the DOM starts counting all over again.
What you really want to look at is the CDOM. By looking at the median or average of this number, you can get an idea about how quickly properties are selling. If the average CDOM is 10 days, the market is moving really quickly. If the average CDOM is 45 days, then the market is moving slowly. Trends are more important than individual numbers. If the CDOM last month was 60 days, and this month it’s 45 days, then the market is improving.
Unfortunately, most real estate agents don’t keep up with all of these trends. And any information you get through the newspaper is about 60 days old. As a result, it’s hard for you, the consumer to get current information about the real estate market. The news gets out slowly to buyers and sellers.
Real estate agents tend to live in the recent past as far as pricing and amount of activity. If the last home the agent worked on sold with multiple offers for more than the asking price, then the agent will probably assure you that to purchase a home, you will need to offer more than the asking price.
This aggressive approach by an agent will get you a home, and maybe required because of the overall behavior of the agents. However, if agents were more inclined to look at the market trends, they might curb their aggressive tendencies. Or at least start to slow them down as the market slows.
Without good information about where the market is and where it has been, you won’t even be able to get an idea about where it’s going. Your agent should be able to get statistics from either the MLS provider or the local Association of Realtors.
Don’t buy or sell without knowing where the market has been and where it appears to be going.
© 2007 by Judy Kane
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