A Few Words about a lot of Numbers

Posted on December 3, 2007
Filed Under Statistics, Real Estate, General |

I subscribe to a data collection service - AgentMetrics by Terradatum - that pulls information directly from RMLS, manipulates it, and allows a two year look at basic trends (there are also algorithms for Market Share and Price Analysis, for another time).  It’s excellent because it allows users to look not only at broad areas, but to cross reference on narrowed area and price to give buyers and sellers a better understanding of what’s happening pertaining to their specific needs.  That’s crucial because, in case I haven’t mentioned it, all real estate is local.

I was asked why some of the numbers don’t match up with what the MLS publishes.  Rather than just focus on those, I thought, before I publish November, I’d go through the entire set of numbers used and why they’re important, or not.

First note RMLS doesn’t publish its data until mid-month because they’re waiting for the books to close.  Individual agents are relied upon to keep the status of their listings updated, and, well, occasionally there are stragglers.  So the data published early is accurate to date but preliminary, and will likely change slightly between now and mid-month.

That said:

1.  SALES reflects those properties that have actually closed, the funds dispersed and the deed recorded.  The numbers are definitive, but, as I’ve noted before, it’s a somewhat lagging indicator; it generally represents properties that went under contract thirty to forty-five days earlier.

2.  PENDING or UNDER CONTRACT refers to those properties on which there’s a binding sales agreement between buyer and seller, is in escrow, but is not yet through all the steps necessary to close.  It’s a much more timely indicator than sales, but suffers from the fact that not all properties under contract make it to recording.  (Parlance: Sale Fail.)

3.  INVENTORY.  Active listings.

4.  MONTHS’ SUPPLY OF INVENTORY; MSI.  RMLS calculates MSI by dividing the inventory on the last day of the month by the number of sales in that month.  AgentMetric divides the inventory on the last day by the number of properties that went under contract that month.  Neither is entirely accurate, but in both cases the importance is in the trend.

5.  DAYS ON MARKET; DOM.  The number of days between the time a property is listed and the day it goes pending.  If it goes pending, then later comes back on the market, those days are not counted in the DOM.  Not an accurate indicator: it does not reflect those properties that are canceled or expire and then are relisted, when DOM starts over.  RMLS has added a cumulative days on market to its market trend algorithm that does give the total, and it’s the difference, say, in an average November DOM of 71 days for the Lake Oswego/West Linn region, and an average CDOM of 133 days.

6.  MEDIAN PRICE.  The price at which half the properties in a given category are above, and half below.  More accurate than the average price, it’s still important only as a trend.  AgentMetrics only gives a monthly year-over-year percentage, RMLS calculates the previous twelve month appreciation.  IMPORTANT: In neither case does that mean that if, say, there were 5% yoy appreciation that a home that sold for $300,000 a year ago will sell automatically for $315,000 today.  There are simply too many variables because…

…all real estate is local.

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