Is it really taking houses that much longer to sell?

DOM or more commonly known as Days on Market is one measurement used in the housing market that is often misunderstood. The reason being is it is so easily and often manipulated. Many times the data supposedly represented actually provides false or misleading information. Its intention was to provide a quick indication of how long a particular property has been for sale. Too long and home buyers begin to wonder what is wrong with the house, why it’s becoming stale. The most obvious answer lies with the price, as in overpriced and too expensive. The seller is pricing according to their pocketbook and not to the market. One approach is successful, the other one is not.

Explaining the Numbers

Current vs. Cumulative – For the month of June, the Pasadena MLS indicates of all the properties that were sold the “days on market” were 97/187. The first number is the current measurement. The second number, the cumulative number. The number 97 represents all of the properties being sold in June that are listed under the current listing agreement. The second number “187” indicates the same property may have been cancelled or could have expired, but represents the total number of days regardless of the listing agreement. So say broker “X’ listed 123 main street and it was not sold and expired 60 days later. Then broker “Y” relisted the property two weeks later, but was more successful. The contract went pending in 30 days. Therefore the days on market would be 30/90.

Back Up vs. Pending – one of the main reasons we are seeing such an increase in the days on market activity is not solely because properties are taking longer to sell. It also has to do with the way the status of a property is changed. In this market, when most agents receive an offer they change the status to “back up”. Now for all intents and purposes, most people do not make offers on properties listed in a “back up” position. Even though the property is under contract, the days on market meter is still running. Consider a short sale entering escrow, it is changed to back up and takes the bank 60 days to accept the contract plus the buyer may have another 17 days to inspect. That’s 77 days the property has been basically off of the market, but due to the manner in which the measurement is calculated, it still continues to add days to the total.

Agent Manipulation – If a lisiting agent has had the property listed 90 days and it did not sell, instead of immediately relisting it, they might wait 3-4 weeks hoping the cumulative days would reset, so when it was relisted it would now show as 1/1 instead of 1/91. There have been some attempts to correct this in the MLS along with some new policies implemented that prohibit agents from cancelling the listing, just to renter a few days later as new to reset the current DOM clock.

Many times, most agents have access to the property history that shows when it was listed along with a record of pricing changes and the number of days between changes. One thing common in today’s market is price reductions. Most initial price reductions are in the range of 2.5% to 4%. Before you make an offer on a property that has been listed for a few weeks checking the pricing history is always a good idea and one of the many things to research.