Seems there’s a statistician in most every gaggle of people.
and did you know that 86.3% of all spoken statistic are made up?
We REALTORS talk a LOT about statistics and trends . . . and we study them and make up our own . . . all in the name of being knowledgeable enough to be able to advise our Home buying and selling clients with confidence.
We talk about things like:
“Price per square foot”
“Average selling prices”
“average Listing prices”
“Median Neighborhood values”
and we juggle percentages to cipher what’s going on as best we can.
The problem is that the market is always shifting and some statistics matter more than others in different market conditions.
We’re currently swinging out of a market in which available housing inventory was TOO HIGH, and pricing was depressed . . . The BUYERS held the good cards because there were MANY months worth of inventory available.
Now . . . the housing inventory is shrinking to the point of extinction in some parts of Middle TN . . . The SELLERS hold the good cards now.
In my 20+ years of noodling all of these stats and trends, there’s one simple measure that seems to have relevance (MATTERS) in EVERY market condition.
“How many months worth of inventory are available?”
3-5 months worth of inventory denotes a fairly balanced market.
Less than 3 months – SELLERS hold the cards
More than 5 months – BUYERS hold the cards.
We determine this stat by considering closed transaction over a period of time and determining (on Average) how many houses sell (Leave the active market) each month . . . We then divide the total number of available houses by that average monthly number . . .
So . . . In an area of town, say there are 45 houses on the market . . .
36 houses closed in the past 6 months
24 houses show as “Pending” or under contract with contingency
36 + 24 = 60 houses leaving the active market in a 6 month period.
10 Houses leave the market each month and there are 45 houses on the market . . . 4.5 months of Housing inventory are available.
Not all real estate statisticians will agree with my method completely – but rest assured that my way is the right way (for me) and as long as I do it the same way every time, it’ll maintain integrity and meaning.
Why the math lesson on my blogsite?
It’s to warm you up for tomorrow’s post 🙂
I’m working on analysis in a variety of zip codes and price points in Middle Tennessee and will be publishing my findings tomorrow.
My suspicion is that we’re going to see a BIG “Seller’s Market” trend (Less than 4 months of inventory) for both houses and condos.
I’ll run these same numbers every month . . . forever . . . and will always pontificate my own “Expert Analysis” so the good people of Nashville and surrounding can know better what they’re up against when buying or selling a house.
Want me to add YOUR zip code or neighborhood to my analysis?
Just connect with me and I’ll run a special report just for YOU.