Success Versus Failure In Real Estate

Posted by Joe Manausa on Wednesday, May 19th, 2010 at 11:30am.

Success and failure rates in real estate can be measured by looking at homes entering the market versus homes leaving the real estate market.

Do you ever wonder how hard it is to get a home sold in today's real estate market? I always do, so I measure two key real estate statistics that I refer to as the home sales success rate and the home sales failure rate. By looking at success versus failure in real estate, I always have a current opinion on the relative difficulty in getting a home sold in today's market conditions.

This information is vital for both home buyers and home sellers. We think it gives our clients an advantage in the market. For buyers, they will have a better understanding of what kind of offer is going to land them the perfect house, at the lowest price possible. For home sellers, it lets them know how competitive they have to be in the market.

Current Success Rates In Real Estate

When we look at the real estate graph below, we see the long term trend (blue area) is approaching 50% for homes selling. Does this mean that 50% of home sellers were successful over the past year? Not really, but it does mean that home sellers are having an easier time finding success today than they have since we begun measuring this in 2008.

Home Sales Success Rate In Tallahassee Image

Understanding Home Sales Success Math

In order to measure the relative success rate (and failure rate) in the housing market, we divide the total number of home sold into the total number of homes listed for sale over a period of time. So, if 100 homes were listed in the past 365 days, and 50 homes sold in the past 365 days, we would say that the home sales success rate for the past 365 days was 50%.

The great thing about measuring this, over time, is that we get to see the movement of the success trend and we can use this (later, last graph) to have a good estimate of the home sales success rate in Tallahassee.

Comparing Home Sales Success Versus Home Sales Failure

In order to measure the relative failure rate for home sales, we divide the total number of home failures (listings that came to an end without a sale) into the total number of homes listed for sale over a period of time. So, if 100 homes were listed in the past 365 days, and 50 homes failed in the past 365 days, we would say that the home sales failure rate for the past 365 days was 50%.

Home Sales Failure Rate In Tallahassee Graph

Again, the great thing about measuring this, over time, is that we get to see the movement of the failure trend and we can use this (later, last graph) to have a good estimate of the home sales failure rate in Tallahassee.

How To Use Home Sales Success Rates And Benefit Over Your Competition

When we combine the information from each graph above into one real estate graph, we get the following image that really shows us what is going on. At the current time, it appears as if roughly 40% of home sellers are being successful, while 60% of them are failing.

Real Estate Graph: Success Versus Failure In Home Sales

The green area is at an all-time high in the graph above, meaning this is the most successful home sellers have been in the past two years. The trend appears to be rising, so I would think this is very encouraging news for homeowners, but I wouldn't get too crazy about it, as still less than a half of them are finding home sales success.

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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