Why do some homes sit on the market longer than others? Why does a home sit for a long period, then all of a sudden receive multiple offers? Why does the small rambler in the neighborhood sell for more than the larger 2 story down the street? Real estate markets fluctuate based on supply and demand, right down to the neighborhood, house style and size!
Traditionally, when you are looking to determine market value of your house, a real estate agent will do a "CMA" (comparative market analysis). To do a CMA, agents look at ACTIVE inventory, PENDING inventory, the EXPIRED inventory and the SOLD inventory. When agents are working to determine value, they typically tend to put the most "weight" on the SOLD inventory. Putting the most weight on the "SOLDS" is a big a mistake. If you're always looking in the rear view mirror, you'll be either behind the market or chasing the market. In my opinion the most important numbers to look at when determining value are the PENDINGS!
PENDINGS tell us where the market is today. When we track PENDINGS we can tell what direction the market is going. Even though we really don't know what the home went under contract for (we won't know this until the home closes), PENDINGS are the number that really tell us how strong the market is.
For the sake of easy math, if you were looking to buy a home in an area that 100 homes for sale in your price range, and there were currently 10 PENDINGS, you have a 10% market ratio. Tracked on a weekly basis, this also means that there is at least 10 weeks of available ACTIVE inventory (the market absorption). As a Buyer you'll know you have the advantage in negotiation, as a Seller you'll have to price very competitively for the market.
Conversely, if there are 100 homes in your area and price range, and there are 80 PENDING sales, tracked on a weekly basis, you'll sell through the inventory in 1.25 weeks and the market ratio is now 80%. You'll find multiple offers in this market with Sellers in complete control.
Specific house styles can be tracked as well. We often find that specific house styles, for instance a rambler style house, can have faster absorption and a lower market sales ratios than other styles in the neighborhood. Remember, when the absorption is fast and the ratio low, the Seller can be more aggressive with pricing.
Very simply stated, ACTIVE inventory indicates supply, PENDING inventory indicates demand and SOLD inventory is historical data.
The Working-for-you team tracks the real estate market weekly -- by area and by price range. We compute weekly absorption rates and market ratios to know what the market is doing today, and to see the direction the market is going.
If you are ready to sell your home, YOU NEED THIS INFORMATION! Give us a call today, and we'll be happy to help you determine the right market price for your home.