I got a call from an agent last week who asked me if the days on market (dom) figures in my market studies were based on the original list date or last list date (the last time the price was changed). It was something she wanted to have a better feel in advance before advising her clients on one of her listings. I directed her to my methodology page and had a pleasant discussion about the differences between the original and last listing dates in calculating days on market.
Ten years ago, this discussion would not have been part of the real estate conversation.
In the late 1990’s, I started tracking listing inventory and the time it took to market a property in Manhattan on a macro level. I had been kicking around the idea since the early 1990’s but couldn’t figure out how to capture the information in a more granular way.
This sounds fairly straightforward but this ability generally doesn’t exist in any listing database systems I have seen or read about.
The problem with listing related information, unlike sales information, is that it is very difficult to capture this information in its aggregate form. Why?
Looking at sales data for answers
If a property closed for $1,000,000 today, I will capture the sales data and keep it in my database in perpetuity. A few years from now, I could look back at my database and see all the sales that closed for about this price on or near this date.
But what about listings?
When I review active listings in a particular market, I look at the days on market before I consider finer property nuances like condition, layout, room count and so on. It provides clues to the upper limit to value, helping define the possible value range of a property whose value we are estimating. The same goes with sales that closed. I want to understand how the property was accepted.
If that same property was listed for $1,000,000 today, the price might be reduced, raised, get taken off the market, re-listed with another agent, etc. Listing systems generally don’t have the ability to capture the snapshot of the market at a previous point in time, other than today. In other words, I can’t query the state of listing activity as of a prior date.
One property could have a half dozen prices associated with it and various dates. The list price tomorrow, if unchanged, would remain the same, however, a simple query on tomorrow’s date wouldn’t show the listing because the listing date is simply the milestone where the current price started. The search would need to encompass what properties were listed on that day by looking at the listings with the same date and then looking back at each record to see if when the last price change was made.
This information gives you a sense of how well the property was absorbed by the market. If it was initially overpriced with many price deductions, it could even suggest that the sales price was somewhat below market levels rather than if the property was listed close to market and sold more quickly, it can often be infer a price more consistent with market. A decade ago, these patterns might have suggested just the opposite but you have to have the information first before you can grapple with this indicator.
I find it humorous when a property is languishing on the market, presumably because it is overpriced, that the owner will resort to raising the listing price when the real estate news reported begins to describe an uptick. This is common and explains why there will always be over priced listings in any type of market.
Listing history of the immediate market ie, price reductions or increases, and their associated date, was something competent appraisers and agents should always consider when valuing a property.
Here are the formulas I use. Days on market is usually split into two different categories:
DOM From Original List Date – Measured from the date the listing was first placed on the market. The calculation is: Original List Date – Contract Date. This is often the easiest to measure but is less useful. For example, with that $1,000,000 property I mentioned earlier – what if the property was listed at $2,000,000 yet worth $1,000,000. Is it a competing listing to other $1M properties? Is it actually in the market? No it isn’t.
DOM From Last List Date – Measured from the last time the list price was changed, if ever. The calculation is: Last List Date Change – Contract Date. This is the more useful of the two methods because it shows the market’s ability to absorb a property once it actually enters the market. Essentially, its the list price of the property just before it goes to contract. In other words, its the list price that brought the property into the correct market segment and attracted buyers.