Some statistics can be very misleading. This from a stats guy.
Take for example, the “Average Days on Market” (ADOM) stat. Every time someone asks me, “What are the average days on market?”, I find myself staring blankly at them, wondering what difference it makes.
Honestly, I just don’t get the question. Picture me cocking my head sideways like a dog, and staring at you for several seconds. Every time!
You’d think after all these years, I’d have a pat answer for you, at least. Nope!
That’s not the way my brain works. Sure, I can stuff useless information into my brain, but it tends to just fall out and smash all over the sidewalk. The truth is, I do not even know what the current ADOM is. I could go look it up right now in about two seconds, but… The sidewalk is messy enough, already.
This “statistic” is completely unreliable and misleading. For one thing, it doesn’t take into account the numerous properties that are listed and then re-listed, usually with the price being reduced several times, until the property finally sells. The Calgary Real Estate Board does not account for the total days on the market – only the number of days since it was last listed. For example, a property could be on the market for an entire year, but if it sells one day after it was last re-listed, then it is reported as one day on the market, which obviously skews the statistic.
What difference does it make, anyway? If the ADOM is 30 days, do you start to anticipate that your listing, now past the ADOM, will sell “any time” now?
Some people seem to think that if you leave your property on the market long enough, eventually it will sell. The truth is the exact opposite: The longer it is on the market, the less likely it will sell.
I talk a lot about a different statistic that I do think is very important – the “Listings to Sales Ratio”. Say there are 3,000 listings on the market and there are 1,000 selling per month. The listings to sales ratio is 3:1. Or, put another way, there are three months of inventory on the market.
But, if the “Listings to Sales Ratio” is 3:1, does that mean that your listing will sell within three months, because after all there are only three months of inventory on the market? No! Remember, there are always new listings coming onto the market to replenish the properties that have sold. So, what if only the new listings sell, and none of the older listings sell? In this case, if the number of new listings remain consistent with the number of sales, then the “Listing to Sales Ratio” always stays the same at 3:1, even if none of the older listings ever sell!
This might sound like an extreme example (only the new listings sell but none of the old listings), but in fact it is much closer to reality than you would think. If I was a gambling man, I would always put my money on the newer listing selling before the older listing. The reason for this is simple: The main reason listings don’t sell is because they are over-priced. Therefore, the longer a listing has been on the market, the more likely that it is over-priced. This is not the only reason for listings not selling, but statistically speaking, it is the most likely.
By the way, speaking about the “Listings to Sales Ratio”, 3:1 is what I would define as a balanced market, meaning it is neither a buyer’s market, nor a seller’s market. The “Listing to Sales Ratio” is a very reliable indicator to predict future market direction, both from an overall general viewpoint, as well as drilling down to very specific local market segments.
So, why would I care about ADOM, when there are far more reliable and accurate indicators at my disposal? (Head cocked sideways).
The truth is, when it comes to making decisions on how to position your property in the marketplace, if I don’t know and don’t care about ADOM, YOU certainly shouldn’t, either. I can show you EXACTLY what to expect in the next few months in your specific market, and I will certainly not cloud the issue with a useless statistic.
The truth is, in this highly competitive marketplace, your concentration should be focused on preparing your home for sale. We can show you exactly what to do to show your home at its best.
At the same time, we will also show you which statistics are important, and why, and how to use those numbers to your advantage. Just don’t ask me about ADOM!
Until next month!