Many experienced home owners are familiar with a commonly used statistic known as: Average Days on Market. It is very frequently espoused by many a real estate agent being interviewed for a potential MLS listing. Perhaps you’ve heard something like, ‘My average listing sells within 28 days of being on the market” or ‘The average selling time of our office is 60 days’, etc.
Well in almost any arena, statistics can be used to support more or less any conclusion. Often, especially within a sales situation, the statistics espoused are the ones that place the presenter in the most favorable light. So while statistical mathematics is indeed a science, it must also be said that choosing the right statistics to use is a bit of an art.
The ‘average days on market’ statistic is one that especially deserves some skepticism. The first thing to note is that any simple average is easily skewed by just a few extreme samples. However, this MLS generated statistic is particularly suspect because of other factors.
One technique an effective agent will use to generate interest in a slow moving property is to temporarily remove an older listing, for a minimum waiting period, and re-list the property with a reduced price. Thus the days on market reset, the listing appears new, and with the price now more competitive it enables a quicker sale. Just a few of these types of samples may skew the result and render the statistic worthless.
It is also important to note that to the old real estate adage; ‘location, location, location’ I would add ‘price, price, price’ especially within current market conditions. The actual time on market of a particular property is dramatically different between neighborhoods and different price ranges, in fact different price ranges within the same neighborhood can have dramatically different times on market. All of these factors contribute to the weakness of this oft used statistic.
There are other means to measure market performance and trends and we will be discussing of few of these in subsequent posts, but for now just be cautious of ‘Average Days on Market’.