Price and Days on Market

Price and Days on Market

There is a direct correlation between price and days on market.  The higher a particular house is priced, then the longer the days on market will be and conversely, the lower a particular house is priced, then the shorter the days on market will be.

Generally speaking, if the days on market starts to accumulate, then the house is probably over priced.

A Reasonable Price Yields a Reasonable Days on Market

Usually a reasonable price can be determined for a house, without experimenting by putting the house on the market.  This can be done by comparing the house to similar houses which have recently sold.  Real Estate agents frequently perform this function by doing Comparative Market Analysis and Broker Price Opinions and Appraisers do the same with detailed appraisals.

If a house is priced reasonably, then the days on market should be about average when compared to other similar houses selling during that particular period in time.

Factors Affecting Days on Market

The days on market may be a bit more complicated to determine than price.  There are various factors which may impact days on market.  For instance, a house may be overpriced at the beginning of its listing, but not see any serious buyers until its price is lowered.  In this case, days on market is not an evaluation of a properly priced house so it will probably be higher, than the properly priced house.

There are, also, situations, where the house is improved during the listing period, such that the house does not become representative of its price until the improvements are made.  Obviously, this will lead to a longer days on market, which are not representative of the house which is eventually sold.

Price Categories and Days on Market

Houses, which legitimately fall into different price categories, may have different average days on market times.  For instance, the higher the price of a house is, then the fewer the number of buyers who can afford the house.  With fewer potential buyers, it should be expected that a house in a higher price category will stay on the market longer.

As an example, assume that a particular community has houses in four different price categories.  Perhaps they are $200K, $400K, $600K, and $800K.  Typically, there will be more of the houses in the lower price brackets because more people can afford them.  For the example price categories stated above, assume that the number of buyers over the course of the year are 24, 12, 6, and 3, respectively.  If it is assumed that the buyers are spread out evenly over the course of the year, then the price categories can expect 2 buyers per month in the $200K, 1 per month in the $400K, 1 per 2 months in the $600K, and 1 per 4 months in the $800K.

If the $200K category house sees no potential buyers in the first half month, then there should be some concern, but alternatively, the $800K house may not need to show concern until after about 4 months without potential buyers seeing the house.

Perspective

Although, days on market is a good statistic to measure, it must be put into proper perspective.  It is important that both buyers and sellers understand its relevance.  The most important factor to consider in selling or buying a house is price.