Five Things You Should be Tracking
It doesn't matter what market I'm in, there are 5 things that are critical to track, and they have to do with things like the pace of the market, what the market is willing to pay, how the market has changed year-over-year, and most importantly what the relationship is between the buyers and sellers in that market.
The first thing that I always track is inventory. When I want to track listings, I look at the pace that new listings come on the market each week. I will look at week-over-week, month-over-month, and year-over-year. The reason I do all that is because it will reveal trends in the area.
For example, if I go back three years and look at new listings week-over-week, it's easy to see that inventory has been on a steady decline. Then you have to ask the question, “Why?” In many areas, it's because of a lack of new construction. But what happens when you have something like Covid-19?
The reason it's more important than ever to track new listings is because you get to see what is going on with the mindset of sellers. Right now, there are three things going on: One, many sellers are just waiting, wondering what do to, and not taking a lot of action. This means fewer homes coming on the market. Two, we have builders that are not building, further reducing the listings coming onto the market. Three, you have those sellers that were getting ready to sell, convinced they could sell and buy up, but instead they decided to refinance and stay where they are.
The reason why I track new listings and why it's so important is because it gives you a really good understanding of what can happen in the market. If you have a sudden decline in listings, no matter where your pending numbers are, those pending numbers will be affected by that.
Median Sales Price
The next thing I look at is the median sale price, and I like to look at month-over-month as well as year-over-year. Again, the goal is to see what is happening with the median sales price trends.
If a market appears to be declining, but the house prices are not (as in the median sales prices are staying the same or going up), that is a clear indication that the market is having inventory challenges. A lack of supply drives the price up.
I've heard people say, wait a minute, the listings in this market are declining; that must mean the market isn't good. Regardless of the new listing and pending numbers, median sales price is critical to watch because if median prices keep going up, it's because of demand.
Time on the Market
How long are homes taking to sell? Is the average days-on-market number increasing or decreasing? You can find some really interesting trends here.
For example, during the Covid-19 pandemic, you would think those days-on-market numbers would go up. In fact, many markets and price points saw the days-on-market numbers go down because the demand was so strong!
Pending vs Active Listings
This relationship is going to tell us exactly what our supply and demand is. The closer those two numbers are to each other, the stronger the demand. The further apart, that means less demand. In many areas right now, in spite of the quarantine, unemployment rate, the economy rate, consumer concerns, we are seeing the pending numbers exceeding the listing numbers. That means the demand is so strong that it is driving prices up.
List Price vs Sale Price
This ratio is so important because it tells us how eager or willing the buyers are to pay above the asking price. It's really important to utilize those numbers to see the trends at work and understand the motivation of the buyers. If the buyers' motivation is high, they are going to pay a high asking price.
The most important thing right now is that your clients need to hear from you. They need to understand that it's not all gloom and doom. They need to understand that in their area, there could be fantastic opportunities for selling and buying. Every situation is different and each market is unique, but all clients appreciate good data.
It's critically important right now, more than ever before, for you to step up. Get into your MLS. Dive into the numbers. Know what the market is doing. Then convey that to your clients, because nothing is as powerful as the data we have right now.
Taking a good hard look at the data has helped me to show and educate my clients on how robust their market really is. I've had real estate agent clients tell me they're slow right now, but it might be that their business is slow, not necessarily that their market is slow. It is important for your mojo to see the difference between the two.
Bring the research to life by using a great example for your client. It could be as simple as letting a potential seller know why now could be a good time to put their home on the market. Show them the numbers. Show them that other sellers in their area are getting above list price for their homes. Use the data and ideas in each of these five categories to bring the market to life for your clients.
Until next week, please be safe out there, and we'll talk to you soon.
By Denise Lones CSP, M.I.R.M., CDEI - The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.