The #1 question people ask me is “How’s the market?” Real estate statistics mostly tell you where the market has been. It’s like driving while looking through the rear-view mirror. If you want to know where the market is heading and drive while looking through the windshield you will want to follow the 4 most important housing market indicators. These are the statistics I look at when talking with someone about buying or selling a home.
Months Of Inventory
Months of inventory tells you how long it would take for all the homes that are currently on the market to sell if no additional homes were listed. A market with 4-6 months of inventory is generally considered a market balanced between buyers and sellers.
When the months of inventory is under 4 months it is a seller’s market and if it is over 6 months we are in a buyer’s market. To gauge the direction the market is going, watch this statistic and see if the number is decreasing or increasing to estimate if the market is heading towards a stronger seller’s market or has turned towards a buyer’s market. When the months of inventory is decreasing you can expect to see prices go up as buyers have fewer homes to choose from.
Days On Market
The second market indicator is days on market. This is how long it is taking for homes to go under contract from the date they are listed. When homes are selling faster that tells you there is more demand than supply and you can expect to see an increase in prices as buyers will feel more pressure to get a home under contract before they lose it to another buyer.
Median Sales Price
The third most important market indicator is median sales price.
Median sales price is calculated by lining up all the sales and picking out the sale right in the middle. It is a better reflection of where the market is heading because it demonstrates how the whole market is shifting as compared to average sales price which may only be reflective of a few outlier home sales.
When we see the median price rising especially along with the first 2 market indicators increasing you can expect to see prices rise in the near future.
Average Sold Price/Original List Price
By comparing the average sold price to the original list price it tells us how much room buyers have been able to negotiate against sellers. When you see this market indicator close to 100% and you see it increasing that tells you the sellers are getting their price. As more and more homes sell at list price or higher you will see new listings come on the market at a higher price.
These market indicators are important whether you are buying or selling a home. As a seller you want to make sure you aren’t leaving money on the table. As a buyer you don’t want to pay too much for a house if you think you can buy it later for a lower price. Buyers also need to gauge the market to make sure they aren’t making offers that are too low. If the market is appreciating and buyers don’t recognize the direction the market is going, they will never get an offer accepted.
Whenever you are ready to talk about your home call us at 512-791-7473 .
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