How To Calculate The Average Time On The Market In Real Estate
If you want to sell a home, then you most likely are curious about the average time on the market for homes similar to yours.
One of the hardest aspects of choosing when to move is trying to choreograph a departure date from one home to your arrival date at the next home.
The fact that you do not know how long the average time on the market for a home like yours is going to be, makes the decision difficult to establish.
Many homeowners have planned to move their families with a specific "key date" in mind, only to find their home languishing on the market for many months (or even years). How exactly are you going to plan your relocation if the average time on the market is 11 months?
The Myth About The Average Time On The Market In Real Estate
First of all, I have great news for you. You can determine an accurate time-table for getting a home sold in nearly every single housing market. There is a myth, created by Realtors, and perpetuated by Realtors, that the MLS will show you how long you should expect your home sale to take. They refer to this as "market time," or the "average time on the market" for a home to sell.
I could spend many paragraphs showing you why this is a bunch of nonsense, but instead will refer you to a few articles where I believe I have demonstrated quantifiable evidence that MLS calculations for the average time on the market are not valid. Please check out the following if you want more proof than "trust me":
- The Real Math Behind Market Time In Real Estate
- How Long Does It Take To Sell A Home?
- Why Is My Home Not Selling?
I think these articles provide all the evidence to demonstrate that we can throw out what the Tallahassee MLS says about the average time on the market, but we can also apply some simple common sense to currently supply and demand statistics in order to determine how long you should expect to wait for somebody to buy your home.
Using Liquidity Rather Than The Average Time On The Market
One definition of the word "liquidity" is the ability to convert an asset to cash quickly. It is also known as "marketability". In order to understand the concept of liquidity in real estate, let's first look at how liquidity provides for price stabilization in the stock market. Here's what I mean.
As I sit here writing this article, I pull up my online trading account to examine different stock offerings on the NYSE. This "largest exchange in the world" provides a means for buyers and sellers to trade shares of stock in companies registered for public trading. When I look at shares of IBM, I find the current asking price (what sellers want) is $196.09, and the offer (what buyers want to pay) is $196.05.
More than 4 million shares of IBM will trade (sell) today, so I think it is safe to say that the current value of a share of IBM stock is between $196.05 and $196.09.
So, if you own a share of IBM, what do you think your average time on the market will be?
If you would like to get $210 for that share, I'm sure a parade of experts can come forward and give you projections on when IBM should hit that level (their version of the average time on the market). If you went to your e-trade account and put it "up for sale" at $210, do you think it would sell today?
In my opinion, if you price yourself out of the market, you literally are not "in the market." This IBM share needs to be priced inside of the trading range, and it will attain the average time on the market (only a few seconds). Incorrectly priced shares of IBM will not sell, even though 4 million shares will trade today.
Imagine then if there was enough liquidity in the real estate market for you to price your home to the nearest penny (as you can easily do with a share of IBM) and get your home sold within the scope of a minute (as you can also do with a share of IBM).
Since real estate is local in nature and is primarily used only by people with geographic limitations, we cannot hope to have four million buyers for your home on every and any given day. Your home is not a share of IBM, but we can calculate the liquidity for homes such as yours, and thus determine a price range that will get your home sold in a predictable (and usually very short) period of time.
How To Decide When To Move
Fortunately for you, I provide this information for free in my Monthly Housing Report. Of course, if you are outside of Tallahassee, you need to drop me an email and ask for my counterpart in your housing market area.
Currently, there are 11 months of supply of homes for sale in Tallahassee. In order to make "11 months of supply" perfectly clear, that means that if nobody else puts a home on the market in Tallahassee, we have all the inventory we need for the next 11 months (based upon the current rate of demand).
If you live in a Tallahassee neighborhood with ten "for sale" signs in the yards, and you add yours to the group, you need to know that only one homeowner is going to get a "sold" rider this month. And next month a new person is going to put up a new "for sale" sign. What do you think you need to do to secure that "sold" rider?
If you would like help determining whether or not you should sell your home, just drop me a note and I am happy to schedule a time for this discussion.
We can help you understand the current supply and demand for your home, and help you assess the liquidity in the market, rather than confusing you with fictitious math that pretends to provide the average time on the market for homes like yours.
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit www.manausa.com or call us at (850) 366-8917.