Thursday
November 23, 2017

Gain a Statistical Advantage

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Gain a Statistical Advantage

Compiling your own stats gives you an edge.

How’s the market? Customers ask this question all the time.

In my early years, I usually responded with whatever general knowledge I’d gathered from MLS reports, newspaper stories, and personal observation.

But as time went on, I found that wasn’t enough. Sometimes the information was too general to be of much use, and sometimes it just seemed wrong.

I asked myself how I could find more accurate market data. And the answer was, I needed to compile it myself.

For the past 10 years, I’ve got up early on the first day of each month and spent an hour extracting raw data from our local MLS system. Because this information changes daily, it must be obtained on the same day each month to be statistically valid.

The key data for resale homes is inventory (the number of homes on the market at that instant) and contracts entered (the number of homes that have gone under contract during the previous month).

By dividing the former by the latter, I get a market index for a month’s supply of homes. An index of less than 2 indicates a hot seller’s market; 2–4, a seller’s market; 4–6, a neutral market; and more than 6, a buyer’s market.

My calculations allowed me to predict 10 percent appreciation locally for 1999 at a time when no one else thought it would be half that figure.

Another revelation: The peak buying season is March to May, not—as was commonly supposed--June to July. Buyers know when they’ll be facing the greatest (or the least) competition for the home of their choice. My sellers know to get on the market in January or February.

Days-on-the-market statistics are especially useful in gaining realistic pricing from sellers: When half the homes are selling within two weeks, and my seller has no offers in four or five weeks, it’s undeniably time for action.

My research also allows me to issue a monthly Market Bulletin to my active clients, which provides a macro-market view complemented by specific information on their neighborhood or town. (See my Web site, www.davidr.net)

Information in the media is usually based on closings and can easily be two to four months out-of-date. By generating your own statistics, you can provide a service that gives you a significant competitive advantage.

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