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Tuesday, October 23, 2007

The market velocity...

I take a lot of time up front, before I’ve even signed the home seller up to a listing contract to try to set realistic expectations for how long it might take to sell their house. I used quite a few statistics, some of which I generate from studying and accessing the data that is available on the local Multi-List Service (MLS). And some it it generated by my company or by other companies that specialize in real estate.

One helpful set of data and the charts that result from it is supplied to us by my company each quarter. It tracks the sales that have taken place in the last quarter and then looks at the current inventory and projects a time to clear that inventory. I call it the market velocity chart – how fast are things moving. In a crude way, you can forecast, based upon that chart, how long your house may be on the market if you put it on today.

The charts are done by county and are divided into $100K price bands. Within each County the townships and/or cities are shown as separate lines. Since I track mostly townships in the western part of Oakland County, I tend to track Milford, Highland, Commerce, White Lake and West Bloomfield Townships and usually have a feature on these statistics in my monthly newsletter. I keep all of the charts on my Web site – – if you are interested in seeing them. Just chose your county.

These statistics are trailing indicators, since they are at best a couple of months old (it takes about a month to get the data compiled from the last quarter), but things aren’t moving that fast that they would be out of date. If anything the trends continue a slow decline, so these statistics might be a bit optimistic. What you can pick out of the charts are things like where to go to get the best selection of houses in a particular price band (if you’re a buyer) or which price bands have the most inventory and thus require the greatest level of aggressive pricing (if you’re a seller). They also should help sellers “get real” in their expectations of how long it might take to sell.

There are places (Milford is one) that show up in these charts with inventory in certain price bands in excess of 2 years. At one point the charts showed that Birmingham, Michigan had 5 years worth of houses in the $600K and above range. It’s still quite high there and in Milford the supply in that range is approaching 5 years worth. There are other places where the inventory in a price band may be 100-200 houses, but the velocity in that band and that location is such that they really only have 8-9 months of inventory.

These market statistics are just some of the things that your Realtor considers when he/she is working on pricing your home and on the marketing plan for it. If he/she comes back and tells you that it may take 9-12 months, don’t shot the messenger; they’re just trying to get your head on straight about the market; otherwise, it will drive you nuts. Remember the 3-P's of Real Estate (post of August 14). Two of the three - Patience and Persistence - are required in great quantities in this market. Of course, the third "P" - Price - has a lot to do with it, too.

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