Real Estate Statistics Explained
Real Estate Market Statistics
Real Estate is one of those industries that are very closely measured, similar to the stock market. Home values are constantly in flux based off of the continuous variations in supply and demand. Although the supply of homes for sale and the level of the demand for those homes are the drivers of real estate values, there are many real estate market statistics that measure a multitude of aspects of real estate.
Many real estate agents and brokers throw numbers around all the time but there are few places you can go to fully understand where these statistics come from and exactly what they mean. We are going to break down some of the most common market statistics into common language. Its important to understand that many market statistics can be deducted in a variety of ways, all with the best intentions.
Although this in no way covers every real estate statistic, it does go over the most common terms.
Absorption Rate – Many times you hear a statistician speak about the real estate market, they will use terms such as “months of inventory” – which is referring to the absorption. Absorption rate is the rate at which active real estate properties are being sold in a predetermined market during a given time period. Absorption Rate is calculated by dividing the total number of available homes for sale by the average number of sales per month (rate of consumption). Absorption rate shows the “rate of sales” and shows the overall supply and demand for a particular real estate market. A “standard” real estate market will generally have about 5 months of inventory---which means if no new listings are taken; it will take 5 months to sell through the existing homes for sale. In a very hot real estate market, you will see inventory levels at 1 or 2 months---meaning homes are being sold very fast and inventory is limited. Different people come up with Absorption using different statistics, so its important (when comparing real estate markets) to stay consistent with one person’s version of Absorption
DOM – Days on Market. When looked at as a market statistic DOM counts the average or median days it takes for a home to go under contract in a particular real estate market area. DOM is also looked at from the individual home perspective to simply see how long the home has been listed. It important to note DOM does NOT count the total time it takes to get to a closing, only how long it takes to go under contract. In a strong sellers’ market, the DOM is small meaning that homes are going under contract quickly.
CDOM – Continuous Days on Market. This is the same figure as DOM, but takes into account a home being removed from the multiple listing service (without a sale) and being relisted. For instance, if a home is listed with one real estate agent and expires after 180 days, when it gets re-listed with a new agent the new DOM would be 1 but the CDOM would be 181.
Price Per Square Foot or $/SqFt. This is simply the price divided by the living area of the home. You will generally see this as an Active price per square foot and a Sold price per square foot. Many automated valuation models (AVM’s) use this figure to get a home’s value. Although it is a quick and easy way to value a property, it doesn’t take into consideration many other aspects that can add or detract from a home’s value.
List to Sell Ratio – This is a common stat used to see how much of a discount is taken from the asking price of a home to the actual sales price of a home and is shown as a numerical value with 100 representing the home selling at exactly its asking price. A number such as 102 will show a home that sold OVER its asking price. Most of the time this statistic is derived, it doesn’t take seller concessions into account such as the seller paying a portion of the home buyers closing costs.
Original List to Sell Ratio – This is another variant of List to Sell Ratio that looks at the homes original list price and compares it to the sales price. Since many of the homes that get listed have some level of a price reduction, unlike the standard List to Sell Ratio which uses the homes FINAL list price, this stat is usually shows a larger discrepancy from the asking price to what the home actually sold for.
Elevate Realty Group provides a variety of real estate market statistics broken down by city and updated on a regular basis. If you would like some more detailed market statistics on your city or neighborhood just contact us and let us know what you would like.
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