Inventory” is simply real estate lingo for “the number of homes for sale.” This stat shows you how much supply is available in the market you are researching. Inventory levels can ebb and flow frequently due to seasonal effects. There’s usually more inventory on the market in the spring-time as the natural rate of real estate activity picks up during this time of year. Alternately, there’s generally less inventory in the Fall or Winter as real estate activity slows.

This can mean mixed things if you’re a buyer or seller in the market, or a real estate agent working with your clients. At times when there is higher inventory, it means there’s more selection for buyers. But there’s also more buyers in the market in the spring time which means more competition for the homes on the market. It’s important to couple your analysis of inventory levels with other market measures such as:

* Median Price
* Days-on-Market
* Price per Square Foot
* Market Action Index
* And a bunch of others

Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137

Altos Research updates their data every week and provides this data.

Price per Square Foot is a measure of value. Think of this stat as answering the question – “How much house am I getting for my money?”

This is particularly important if you are analyzing a market with a diverse mix of homes. For example, one 3-bedroom home (or Condo…) could be 1800 square feet and another in the same neighborhood could be 2200 square feet. If they are both listed at the same price, you’d be able to “get more house” by purchasing the 2200-square foot home (all other factors equal such as condition, lot size, highway access, school district, and all the other stuff that affects home prices…).

When examining the Price per Square Foot stat in a market area – a city or zip code – it’s very helpful to know “how much house you’re getting for your dollar.”

Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137

research provided by Altos Research

Simply put, “Days-on-Market” tells you how long the active properties currently for sale, in aggregate, have been on the market (a.k.a. “time on market”). Said otherwise- “of the active listings currently available for sale – how long have they been for sale?”

Compare this to “Time to sale” which is used to describe only those selected properties that sold and is a statistically different measurement. “Time to sale” only looks at those properties that sold vs “time on market” which looks at all active listings as defined above.

Most importantly, while the values of the Altos Research “days on market” and the “time to sale” may not match, you’ll find that these numbers are closely correlated. Both values rise is weaker markets and fall in stronger markets.

The Days-on-Market number that you see here on AltosResearch.com and in your Market Reports is a “cumulative” number. So what does that mean? Sometimes listing agents will pull a listing from the active market and re-list the property in the near future – maybe a couple of weeks or months down the road. This is a common action for an agent to take if a property has been on the market for an extended period of time or if the property will have its price reduced. Frequently, this also resets the days-on-market number back to “0 days” in the local MLS search. By re-listing the property, it can appear to be “new” in the local market because new buyers in the market may not have seen the property previously. But, that doesn’t really tell you want the true “days-on-market” value is in that market.

To correct for that, we calculate “Days-on-Market” as a cumulative number, which means if a properties leaves the active market and is relisted again within a 90-day period, we assume that they property was never really “off the market” – more like “it was taking a break.”
Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137

research provided by Altos Research

Maybe median price is increasing at the same time that inventory levels are increasing while days-on-market is relatively flat. Using these three market stats individually makes it difficult to determine what is exactly is going on. We developed the MAI to roll together some of these key stats (and a few others) to generate a number, indexed to “30″, to determine if the local market is trending towards a “buyer’s market” or “seller’s market.”

From our reports:

“Residential house prices are a function of supply and demand, and market conditions can be characterized by analyzing those factors.

“The Market Action Index (MAI) illustrates the balance between supply and demand using a statistical function of the current rate of sale versus current inventory. An MAI value greater than 30 typically indicates a “Seller’s Market” (a.k.a. “Hot Market”) because demand is high enough to quickly absorb available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a “Buyer’s Market” (a.k.a. “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall.” research provided by Altos Research

Keep in mind that an MAI value close to “30″ probably means that the local market is balanced or neutral. So if the MAI for your local market is somewhere between 27-33, then it’s likely to be either a buyer’s market or seller’s market based on the individual street or home area that a particular property is in.

Contact me today for more information!  Rod Potter/ Email: rpotter@carolina.rr.com / Phone: (704)840-4137

research provided by Altos Research

In reporting a number of key real estate market statistics, there two statistical measures – MEDIAN and AVERAGE – that can be confusing to understand sometimes. Let’s take a minute to explain the difference.

AVERAGE is the term that is used more frequently in newspapers and on TV, but MEDIAN PRICE are usually a more accurate way to look at home prices in a city or neighborhood.

For example, let’s say that there are 10 homes for sale in a city. The prices of the homes are:

$250,000
$275,000
$285,000
$300,000
$300,000
$315,000
$500,000
$550,000
$600,000
$1,200,000

To calculate the AVERAGE PRICE, we would add up the prices of these 10 homes and divide by 10:

($250,000 + $275,000 + $285,000 + $300,000 + $315,000 + $300,000 + $500,000 + $550,000 + $600,000 + $1,200,000) / 10 = $457,000

We’ve calculated that the AVERAGE PRICE in this city is $457,000.

So how is that different from the MEDIAN PRICE?

The MEDIAN PRICE is “the number in the middle.” To find the MEDIAN PRICE, you simply to put the values in order from lowest to highest, and then find the number that is exactly in the middle. Using our same 10 properties for sale:

$250,000
$275,000
$285,000
$300,000
$300,000
$315,000
$500,000
$550,000
$600,000
$1,200,000

We can divide the 10 properties into two equal groups:

$250,000
$275,000
$285,000
$300,000
$300,000

$315,000
$500,000
$550,000
$600,000
$1,200,000

So the MEDIAN PRICE is somewhere between $300,000 and $315,000.

To calculate the MEDIAN PRICE, you just take the two values in the middle and divide by 2:

MEDIAN PRICE = ($300,000 + $315,000) / 2 = $307,000

So here we’ve calculated that the MEDIAN HOME PRICE in this city is $307,000. As you can see, this is very different from the Average Home Price of $457,000.

This is an important distinction to make because the AVERAGE PRICE in this city is greatly influenced by the one expensive home at the top of the market selling for $1,200,000. But, the MEDIAN PRICE is just an even count of how many homes are above or below the midpoint – a more accurate representation of prices in a neighborhood.

You can use the same analysis for other key statistics such as DAYS ON MARKET. Suppose that you have a couple of properties that have been on the market for an extended time. If you use AVERAGE DAYS ON MARKET, the number will be much higher than if you were to calculate the MEDIAN DAYS ON MARKET.

Here’s a specific example:

What if you’re working with a buyer that can afford up to $325,000 for a home? If you use the AVERAGE PRICE of $457,000 for the neighborhood, it appears that that area might be too expensive for the buyer. But, if you use the MEDIAN PRICE of $307,000, then this neighborhood will be right in the buyer’s zone.

In the Altos Research reports and AltosCharts, we provide both AVERAGE and MEDIAN statistics so that you can see how these differ in every market that we cover.