I was finalizing a market analysis today for a homeowner that is thinking about selling their home. I always look at Active properties (homes currently for sale), as well as what’s currently Under Contract and recent Closed sales to give a complete picture of the market.
As I was reviewing the 12 properties I selected as comparison homes, I noticed that the recorded Days on Market (DOM) for some of the properties seemed suspiciously low. I have actually shown all of the homes in my analysis and knew that several of them were on the market for much longer than their recorded DOM. The data was not accurately reflecting the current market.
The Actual DOM reported in the MLS only records the DOM for a specific listing contract related to that property, with a specified listing time and listing agent. Once the listing contract expires, the DOM is not carried over to the new listing for the same property.
For example, let’s say Suzy Snowflake lists 123 Main Street from January 2008 through April 2008. The property does not sell, but is relisted (with Suzy Snowflake or another agent) from May 2008 until September 2008. The property has a purchase contract accepted on June 1, 2008. The Actual DOM recorded in the MLS would be 30 days. It does not go back and take into account the additional 4 months that the property sat on the market. Days on Market is managed downwards because multiple listing periods for the same property are not appended to each other in the MLS.
This is troubling because it can create a grossly inaccurate picture of the market. Properties are reported as selling much more quickly than they actually are. Let’s take a look at what I witnessed for this market analysis…
The Blue portion of the stacked bars represents the DOM as recorded by the MLS. The Orange portion of the stacked bars represents properties with multiple listing periods and the “Hidden” Days on Market that are not readily transparent in the MLS. Properties that only have Blue bars do not have any “hidden” days, the property sold in the initial time period in which it was listed. Properties with both Blue and Orange bars were listed multiple times and the total of the stacked bars represents the True Total Days on Market.
As you can see, there are some serious increases in True Days on Market when the entire listing history is researched. This data presents a truer picture of the market. Houses are moving much more slowly than the MLS data would first lead us to believe.
For my listing presentation with the Seller, I manually research all of the listings in the MLS to find the True Days on Market. Although it’s possible to do this manual search on a one-off basis, the MLS could easily fix the problem. All they would need to do is look for listings on the same property that don’t have a closing date (meaning they didn’t sell). If there was a reasonably short gap between when it went off the market and when it came back on (1 month or so), then they could add the Days on Market stats together and present a truer picture of the market’s selling speed.
Today I’ll be sending an email to the MLS suggesting that this change be made. It will present a truer picture to all involved and add more transparency to what’s actually going on in the local real estate markets.