Later today, I'm showing a few homes to a nice couple from out of town. Like most folks who live elsewhere and are considering a move to the New River Valley, I've been emailing them listings for quite some time. I've previewed many of the homes beforehand, and all told we've seen a few dozen homes, at least, in the time we've been working together. I really like these folks, and always look forward to working with them. The right house hasn't come available yet, but we've got such a good rapport now that I think all three of us will know the instant we find it.
One question that they ask on a VERY regular basis is "what's the Days On Market?" (DOM for short). My clients want to know whether a home has been on the market for 30 days or 300 days; it's a very important statistic for them. In their minds, the DOM is an indicator of whether the home has a flaw – seen or unseen – that should be accounted for. One of the houses we'll see today has been on the market for 7 days, while another, nearly $80000 more, has been on the market for over 400 days, and the average for all of them is 143 days. In the New River Valley, the average DOM is 127 days right now … just over four months, while last year at this time it was 78 days. The question I have for you is, "Does the DOM really show what a house is worth?"
In my mind, it has no bearing on whether a home is "worth" what the listing price is. What do you think?
My thought is this (I know, you didn't ask for my thought but I'll share anyhow) … there are times when a house will sit on the market because it has something functionally wrong with it, and there are times when it'll take a long time to sell because it's priced too high from the outset. Maybe the basement might have evidence of leaks or buckling, the roof needs replacing or there are high-tension power lines running through the backyard. These things are all fairly obvious, and it seems to me that whether it's a price issue or a "function" issue the house will eventually adjust to the market by either fixing the "function" problem, or by moving the price to a point that's inline with market conditions.
So many buyers – and agents too – seem to use Days On Market as a barometer for the value of a home. Chances are good that if I listed the same house twice, in identical markets, I'd get a stronger offer after 7 days then I would after 170 days. Has the market value falling during that time? No, probably not. It could be that my seller isn't willing to entertain anything other than the list price (and I've got some expectation management to do).
What do you think? When you bought your home, or when you buy your home (need an agent?), did/will Days On Market have any bearing as to the home's value? Add your ideas and thoughts below if you'd like. As time on the market rises, my guess is that more and more will make it an increasingly important statistic.
Jeremy, you said “I guess I’m struggling with the fact that if a house is priced right and it’s still not selling, how does DOM play into what the value is?”
The simple answer is, it doesn’t. I’m not a realtor and never have been. I have, however, bought and sold a few homes. Some buyers might look at DOM and think that a seller will be “motivated” (realtor term) or even “desperate” (civilian term) to accept a lowball offer if the listing is stale. But keep in mind that buying a home is an emotional investment, too. It’s not “black and white,” no matter how hard you try to squeeze it into that category. Some homes are quirky, some are in remote locations, some smell funny, some have narrow steps or low ceilings or small windows or bad decorating. I believe that there is a buyer for every property, but it’s a matter of timing and taste. Sometimes DOM means nothing more than most buyers’ inability to see past awful paint colors or unkempt landscaping. Those things are easily remedied and don’t drastically affect the value of a property, but may cause DOM to rise as buyers look elsewhere. Not all buyers can see past the quirks, so a house sits longer. It’s not just about location, features, and price, but for the buyer it’s also about “feeling home.”
Jeremy, you said “I guess I’m struggling with the fact that if a house is priced right and it’s still not selling, how does DOM play into what the value is?”
The simple answer is, it doesn’t. I’m not a realtor and never have been. I have, however, bought and sold a few homes. Some buyers might look at DOM and think that a seller will be “motivated” (realtor term) or even “desperate” (civilian term) to accept a lowball offer if the listing is stale. But keep in mind that buying a home is an emotional investment, too. It’s not “black and white,” no matter how hard you try to squeeze it into that category. Some homes are quirky, some are in remote locations, some smell funny, some have narrow steps or low ceilings or small windows or bad decorating. I believe that there is a buyer for every property, but it’s a matter of timing and taste. Sometimes DOM means nothing more than most buyers’ inability to see past awful paint colors or unkempt landscaping. Those things are easily remedied and don’t drastically affect the value of a property, but may cause DOM to rise as buyers look elsewhere. Not all buyers can see past the quirks, so a house sits longer. It’s not just about location, features, and price, but for the buyer it’s also about “feeling home.”
Brian, if DOM doesn’t affect value then why are we using it as a negotiating tool? Either the house is overpriced, or it’s functionally imperfect … that’s the piece I’m struggling with, it seems black or white to me. I know you’ve had clients who have said “I’m not adjusting my marketing point (read: price), tell them to bring me an offer!” We all have worked with that person, they’ve been on the market a long time and they’re not going to adjust their price, so despite having been on the market a long time they’re not willing to “deal”. How is DOM a good indication of their motivation?
Diana, absorption rate should definitely be discussed, I think, it’s certainly a measuring tool. If there is 45 months worth of inventory on the market (which I know VA has in one particular niche), then I’m not concerned if I’m seeing a property on the market for a year. That’s a good point.
Ryan – thanks. Sole agent Dual agency is undermining our credibility as an industry. Just sayin’. But related to DOM, it’s interesting you pondered the seller’s perceived value vs. DOM – that’s one piece I’d not considered, I know how buyers seem to be looking at DOM, but how are sellers? I’ll need to look into that.
Clapp – should’ve known that the guy who changes cars about as often as he cuts his hair would’ve compared it to a car dealership! 🙂 I can see your point about a 2008 vs. 2009 model … there’s a perceived value in a car, but a car is a depreciating “asset” (and I use that term loosely). A home is a product that, while some areas of the country are certainly depreciating, in most cases is not – it’s an appreciating product. So why do we count DOM against that asset?
Jim – crap, it’s hard to argue with that logic. Still shaking my head on how to counter that.
Sarah – I’m sure that’s a great feeling as a buyer, to just KNOW. Sometimes as an agent, I know the client so well from my dealings with them that I just know, as well. My second transaction ever was that way, I walked in to preview and just knew they’d buy it. So what you’re saying is that there are factors that are not quantifiable that override DOM – is that right?
Candy Lynn – if you’re not placing much value on DOM, how are your clients responding? Are they following your lead, or resisting and falling back on a DOM=value correlation?
I guess I’m struggling with the fact that if a house is priced right and it’s still not selling, how does DOM play into what the value is?
Brian, if DOM doesn’t affect value then why are we using it as a negotiating tool? Either the house is overpriced, or it’s functionally imperfect … that’s the piece I’m struggling with, it seems black or white to me. I know you’ve had clients who have said “I’m not adjusting my marketing point (read: price), tell them to bring me an offer!” We all have worked with that person, they’ve been on the market a long time and they’re not going to adjust their price, so despite having been on the market a long time they’re not willing to “deal”. How is DOM a good indication of their motivation?
Diana, absorption rate should definitely be discussed, I think, it’s certainly a measuring tool. If there is 45 months worth of inventory on the market (which I know VA has in one particular niche), then I’m not concerned if I’m seeing a property on the market for a year. That’s a good point.
Ryan – thanks. Sole agent Dual agency is undermining our credibility as an industry. Just sayin’. But related to DOM, it’s interesting you pondered the seller’s perceived value vs. DOM – that’s one piece I’d not considered, I know how buyers seem to be looking at DOM, but how are sellers? I’ll need to look into that.
Clapp – should’ve known that the guy who changes cars about as often as he cuts his hair would’ve compared it to a car dealership! 🙂 I can see your point about a 2008 vs. 2009 model … there’s a perceived value in a car, but a car is a depreciating “asset” (and I use that term loosely). A home is a product that, while some areas of the country are certainly depreciating, in most cases is not – it’s an appreciating product. So why do we count DOM against that asset?
Jim – crap, it’s hard to argue with that logic. Still shaking my head on how to counter that.
Sarah – I’m sure that’s a great feeling as a buyer, to just KNOW. Sometimes as an agent, I know the client so well from my dealings with them that I just know, as well. My second transaction ever was that way, I walked in to preview and just knew they’d buy it. So what you’re saying is that there are factors that are not quantifiable that override DOM – is that right?
Candy Lynn – if you’re not placing much value on DOM, how are your clients responding? Are they following your lead, or resisting and falling back on a DOM=value correlation?
I guess I’m struggling with the fact that if a house is priced right and it’s still not selling, how does DOM play into what the value is?
The Absorption Rate is also a consideration when evaluating the DOM. If you have 40 houses in the $400,000 – $500,000 price range with a market absorption rate of 10 properties per year, then the number of buyers in the price range is an issue to review with the sellers for market positioning and with buyers who are interested in making an offer. Obviously, pricing the property so that it is in the ten properties that sell would be important.
I agree many buyers consider the time on the market important which brings up properties that are relisted as new by the listing agents.
The Absorption Rate is also a consideration when evaluating the DOM. If you have 40 houses in the $400,000 – $500,000 price range with a market absorption rate of 10 properties per year, then the number of buyers in the price range is an issue to review with the sellers for market positioning and with buyers who are interested in making an offer. Obviously, pricing the property so that it is in the ten properties that sell would be important.
I agree many buyers consider the time on the market important which brings up properties that are relisted as new by the listing agents.
Jeremy, while days on market doesn’t affect value per se, it does affect a buyer’s perception of value and in turn affects the price that that house will fetch. It can reasonably be used as a guide to determine how willing a seller may be to negotiate a lower deal.
Jeremy, while days on market doesn’t affect value per se, it does affect a buyer’s perception of value and in turn affects the price that that house will fetch. It can reasonably be used as a guide to determine how willing a seller may be to negotiate a lower deal.
Price and condition matter, and Days on Market can reflect problems with either. That said, it doesn’t *always* matter.
When we bought our current house, it had been on the market for nearly a year. It had gone into contract almost immediately, but lingered as a pending sale while the buyers tried several ways to get financing after their original lenders backed out. It was in contract a second time, off the active market, frustrating the sellers and going nowhere again. The pictures online were so bad that I didn’t even want to set foot inside it, but my real estate agents knew me well and insisted. In the doorway, I knew it was my house. I couldn’t have cared less about DOM.
DOM can indicate a flaw or a problem with the house, or in the case of the house we bought, horrible listing photos. Overpricing is easy to spot. Sometimes though, I think it’s just that things work out as they should and the house is ready when the right buyers are there.
Jeremy:
I get that question all the time.
My reply is “In this market, DOM is not as relevant as the listing history & a current CMA that includes recent solds and currently listed homes.
BTW our current inventory in LBVRAR is over 45 months at current rate of sales but the days on market range from 175 days to over a year. We’re seeing many listings expire & not renew or be withdrawn.
All of this makes it very difficult to place much value on DOM.
Jeremy:
I get that question all the time.
My reply is “In this market, DOM is not as relevant as the listing history & a current CMA that includes recent solds and currently listed homes.
BTW our current inventory in LBVRAR is over 45 months at current rate of sales but the days on market range from 175 days to over a year. We’re seeing many listings expire & not renew or be withdrawn.
All of this makes it very difficult to place much value on DOM.
Funny, I have a post scheduled on this for next week – I think DOM absolutely matters.
For example, in the Charlottesville market, there are 350 homes on the market that are under contract.
122 have days on market of less than 30 days. I’d argue that those 122 properties were priced better than the others.
Funny, I have a post scheduled on this for next week – I think DOM absolutely matters.
For example, in the Charlottesville market, there are 350 homes on the market that are under contract.
122 have days on market of less than 30 days. I’d argue that those 122 properties were priced better than the others.
Price and condition matter, and Days on Market can reflect problems with either. That said, it doesn’t *always* matter.
When we bought our current house, it had been on the market for nearly a year. It had gone into contract almost immediately, but lingered as a pending sale while the buyers tried several ways to get financing after their original lenders backed out. It was in contract a second time, off the active market, frustrating the sellers and going nowhere again. The pictures online were so bad that I didn’t even want to set foot inside it, but my real estate agents knew me well and insisted. In the doorway, I knew it was my house. I couldn’t have cared less about DOM.
DOM can indicate a flaw or a problem with the house, or in the case of the house we bought, horrible listing photos. Overpricing is easy to spot. Sometimes though, I think it’s just that things work out as they should and the house is ready when the right buyers are there.
NRVLiving,
As a faithful reader of your blog, I would like to put my two cents in on this topic. I disagree with you from the standpoint of a basic sales principal. Just like any item whether it’s a house, car, or a piece of clothing, it has a shelf life. The longer something hangs around without selling it’s value is diminished to a buyer. Not necessarily from what it’s worth but from the value place on it by a person who is buying it. For example, since its the fall of the year and the new model year. Here’s is car “A” that is brand new with zero miles that is a left over 2008 model. Then we have car “B” that has zero miles as well but it’s a 2009 model. They are equal and unchanged but since the 2008 model is one model year older it will need to be reduced in order for it’s value (in the eyes of a buyer) to be equal to the 2009. This is the same scenario for a listing that has been on the market for 180 days versus the identical house next door that just came on the market today. If someone hasn’t seen the value in the listing on the market for the past six months they most likely will not pay the full price as compared to the new listing.
Plus another factor to consider is the reason we keep the DOM statistics. Real estate inventories and DOM are barometers for how the market is doing. In a hot market prices go up and DOM come down. In this market it’s just the opposite.
I know you’ll disagree but I wouldn’t pay the same for a house that had been on the market for six months as compared to a new listing fresh to the market.
The ball is back in your court.
T
NRVLiving,
As a faithful reader of your blog, I would like to put my two cents in on this topic. I disagree with you from the standpoint of a basic sales principal. Just like any item whether it’s a house, car, or a piece of clothing, it has a shelf life. The longer something hangs around without selling it’s value is diminished to a buyer. Not necessarily from what it’s worth but from the value place on it by a person who is buying it. For example, since its the fall of the year and the new model year. Here’s is car “A” that is brand new with zero miles that is a left over 2008 model. Then we have car “B” that has zero miles as well but it’s a 2009 model. They are equal and unchanged but since the 2008 model is one model year older it will need to be reduced in order for it’s value (in the eyes of a buyer) to be equal to the 2009. This is the same scenario for a listing that has been on the market for 180 days versus the identical house next door that just came on the market today. If someone hasn’t seen the value in the listing on the market for the past six months they most likely will not pay the full price as compared to the new listing.
Plus another factor to consider is the reason we keep the DOM statistics. Real estate inventories and DOM are barometers for how the market is doing. In a hot market prices go up and DOM come down. In this market it’s just the opposite.
I know you’ll disagree but I wouldn’t pay the same for a house that had been on the market for six months as compared to a new listing fresh to the market.
The ball is back in your court.
T
DOM certainly matters to me, Jeremy. As a buyer it’s one of the first things I look at on the listing – though I’ve never really considered it a measure of the home’s quality or value (perhaps because I grew up in a family-owned home improvement business and developed a understanding of those on my own).
I look to DOM as a way to measure the seller’s motivation. Combined with other factors like pricing/reduction history and the seller’s personal situation (ex. is there another mortgage somewhere), I find DOM useful.
Of course, if every agent was like you and chose to decline dual agent agreements, this wouldn’t be as relevant!
In the end, I suppose the *true* value of the home doesn’t change with increased DOM, but it would be interesting to see data for the seller’s perceived value as DOM increases (because there’s certainly some value in washing one’s hands of an empty home).
DOM certainly matters to me, Jeremy. As a buyer it’s one of the first things I look at on the listing – though I’ve never really considered it a measure of the home’s quality or value (perhaps because I grew up in a family-owned home improvement business and developed a understanding of those on my own).
I look to DOM as a way to measure the seller’s motivation. Combined with other factors like pricing/reduction history and the seller’s personal situation (ex. is there another mortgage somewhere), I find DOM useful.
Of course, if every agent was like you and chose to decline dual agent agreements, this wouldn’t be as relevant!
In the end, I suppose the *true* value of the home doesn’t change with increased DOM, but it would be interesting to see data for the seller’s perceived value as DOM increases (because there’s certainly some value in washing one’s hands of an empty home).