In real estate, less is really more, especially if you are talking about how long a house has been up for sale. Days on the Market (DOM), a number that is often used when devising a pricing strategy for both sellers and buyers, has its fans and detractors. Some real estate agents use it to guide their clients through the sale history of the property; for others, DOM, which can be discovered on the Multiple Listing Service (MLS), is not a major game changer.
“I think it’s easy for days-on-the-market data to be misunderstood, because there are so many different factors that go into determining [it],” says Kelly Lindauer, a local agent with Better Homes and Gardens Real Estate III. “If properties are poorly priced, they are going to be on the market longer, and that does not necessarily mean the market condition is bad.”
When a home isn’t selling, price seems to be the number one suspect. Michael Guthrie, CEO of Roy Wheeler Realty Company and past president of Charlottesville Area Association of Realtors (CAAR), says that at times, the condition of the home can be a deterrent for buyers. “Sometimes houses are just really cluttered, the closets are totally full, they have lots of furniture,” he says. In most situations, however, it’s price.
“You might think that the house is worth X and you can put it on the market for that, but you find that nobody is interested in that price. You’ve got to reduce [it] to the number people feel most comfortable with,” he says. And let’s remember, it’s still a buyer’s market.
In fact, the average DOM for the Charlottesville area is still uncomfortably high. According to CAAR’s year-end report, the 2010 area average (including neighboring counties) was 117. For the City of Charlottesville, the average DOM was 107; Albemarle’s was 106. By comparison, in 2006, the city averaged 57 DOM and the county, 69. The next year, the city jumped to 79 and Albemarle to 91. It was the beginning of the market downfall.
The data show that the 2010 average recorded a slight decrease from 2009. And that’s good news.
Some industry pros feel that DOM is not very useful because it can be manipulated. When a home has been on the market for a while, the agent, with his or her clients’ permission, can remove it from the market and re-list it at a later date (still keeping the number of days intact). This strategy is common during the Thanksgiving and Christmas holidays. There are, however, tales of agents who take the home off the market for about 90 days, the time necessary to reset DOM to zero.
“Who wants to take the property off the market for three months, though?” says Lindauer.
Nonetheless, the DOM indicator does have advantages. “I think it’s worthwhile to look at days on the market for competing properties. I think that price and days on the market can be evaluated hand in hand,” says Lindauer.
If you are in the market for a mansion, castle or anything extravagant, DOM won’t be your first concern. Likewise, Guthrie says that if a seller has a unique property, DOM may not matter in the end. “You are waiting for that right person,” he says. “No matter how long it’s been, that house will sell.”
Although DOM is sometimes used to take the temperature of the real estate market, Guthrie says that “months of inventory” (MOI) is a much more reliable thermometer. Months of inventory is the number of months that it would take to sell all the existing area listings. “It’s the most important number to look at,” says Jonathan Kauffmann, principal broker/ and owner of Nest Realty. “It’s the basic supply and demand.”
And our local temperature’s not so healthy. In a neutral real estate climate, average MOI numbers range from five to six months of inventory. The current area MOI is a whopping 15 months.—Chiara Canzi