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What Does ‘Days on Market’ Mean? How Buyers Can Take Advantage

In the real estate game, many buyers understand that knowing a home’s days on market (DOM) is absolutely critical intel. Why? Because the number of days a home spends on the market directly affects the price of a home. Plus, this information can be used to the buyer’s benefit to negotiate a lower price. Here’s how!

What does ‘days on market’ mean?

‘Days on market’ is the number of days that a property has been listed on the local multiple listing services (MLS) until a seller has accepted an offer and signed a contract. It can also be referred to as “time on market” or “market time.”

When browsing home listings, buyers should always take a look at the number of days on market to determine how other buyers are reacting to the property.

A house that has only been on the market a few days typically means that home could go at the asking price or higher. But a home that has been on the market for a longer period of time, say 187 days, is likely overpriced in most markets.

This is usually a sign the seller seriously misread the market.

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How buyers can use DOM to their advantage

While a high DOM can be a sign to buyers that something is wrong with the house, it can also indicate a potential bargain.

Buyers and their agents can use days on market as a search filter to identify homes that have been listed for a long time.

While DOM can indicate sellers who are refusing to budge on their asking price, it can also identify sellers who haven’t received offers and who may be open to a dramatically lower offer. Because the last thing sellers want is for their house to get stale on the market.

A home with a high DOM tends to get overlooked because it becomes the ‘rotten banana. It could be a beautiful home that was just overpriced from the start, but after weeks or months on the market, everyone wonders, ‘What is wrong with this house?’ And that perception can be difficult to recover from.

How to decide what to offer using DOM

Generally speaking, the longer a house is on the market, the more there’s the potential for buyers to score a great deal.

Depending on the market, a home that’s been on the market for a long time begs for negotiation in a real estate agent’s mind.

Buyers and their agents can often learn more about the seller’s urgency to sell by calling the property’s listing agent.

Ask probing questions about why the property has sat so long on the market.

Also feel out the seller’s openness to lower offers. While listing agents can’t violate their fiduciary responsibility to their sellers, you can usually gauge a seller’s openness to lower offers based on how the listing agent responds.

You can then arrive at an offer with your agent by researching recent comparable sales.

Days on market loopholes

In certain markets, a listing’s days on market can actually reset. For example, in New York, if a listing is taken down for 90 consecutive days, the clock goes back to zero days on market when it’s relisted. The same generally happens if a new agent takes over the listing.

Be sure to ask your agent to do a deep dive on a listing’s full history so you will know exactly how long the home has been for sale.

What sellers need to know about DOM

An overpriced home can be the result of sellers who think their house is the best in the neighborhood and won’t deviate from that idea, no matter what.

Some sellers don’t understand that buyers set the market numbers.

You can figure out your home valuation by entering your address into an online home value estimator, which will give you a free evaluation of what your home is worth, based on recent home sales in the area, among other things. But that’s just a starting point—remain objective and talk in-depth with your agent to avoid a high DOM.

Size Matters: Tracking the Economy Through New-Home Square Footage

The U.S. housing market may not be synonymous with the business cycle, as a famous 2007 paper proclaimed, but the ups and downs in housing, which represents a big part of the economy, usually do offer hints about what’s going on more broadly.

That’s why economists closely watch housing market indicators like sales volumes and home prices — as well as how Americans are accessing the market and managing their obligations to mortgages, rental costs, taxes, and so on.

But small details about the housing market can say just as much about how well Americans, and the broader economy, are doing.

Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.

The bigger question, as always, is about the specifics of what we’re seeing right now. The median size perked up at the beginning of this year, as the housing market shook off a difficult 2018.

But overall, sizes have been on a downward path since mid-2015.

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Current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off.

Existing-home sales, which have only eked out a gain in two of the last 12 months, would say we’re past cycle peak but new construction should continue to trend up, which would suggest it still has legs left.

In the post-recession economy, entry-level buyers were unable to break in to the market. But now their pent-up demand could help elongate the housing cycle.

It may even help cushion the overall economy from a near-term downturn. We have no recession in our forecast for the foreseeable future.

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David DaCosta
DaCosta Properties - Harcourts Prime Properties

760-846-0557
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David DaCosta | 760-846-0557 | Contact Me
Harcourts Prime Properties - 2385 Camino Vida Roble, Ste 200 - Carlsbad, CA 92011
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