The Hotness Factor ... an often overlooked yet critical statistic to bring awareness to both buyers and sellers. It is a measure of the total number of homes in the market place that are listed in a price range and how many of that total are under contract.
Example: In the price range of $300,000 to $400,000 in a defined area there are 50 homes currently listed for sale. 25 homes out of the 50 are under contract. The formula - # of under contract homes divided by the total of listings will give the hotness factor. In the example you have 25 divided by 50 equals 50% hotness factor. This means that 1 out of 2 homes listed in this price point are under contract.
How the Hotness Factor is beneficial to buyers & sellers?
Lends understanding - Helps the buyer/seller visually understand the pace of the market. For a buyer it enables them to see competition in their purchase range. If it is a hot market price point, they will know that homes are selling well, probably quickly when first on market. Buyers may not have the luxury of time ... if they like it then make an offer or it will be gone! A seller will have an expectation set - faced paced, slower market.
Sales Price - Buyers will understand if in fast paced market they may have multiple offer competition on homes. This means making good, solid, clean offers on properties. For sellers, if in a slow moving price point they will need to price to be one of the better choices to entice buyers. If selling in a hot market then a seller can be more aggressive towards the top end of their range on a list price.
The Hotness Factor, an excellent tool in understanding your position in the market place and within your market price.