Understanding Real Estate Metrics

Understanding Real Estate Metrics: Days on Market, Months of Inventory, and More

Navigating the real estate market can sometimes feel overwhelming, especially when you come across terms like "Days on Market," "Months of Inventory," and other industry jargon. At Nations Network, we want to help you feel confident and informed whether you're buying or selling a home. Let’s break down some of the most common real estate metrics and what they mean for you.

1. Days on Market (DOM)

Days on Market refers to the number of days a property has been listed for sale before it goes under contract. A lower DOM often indicates a hot market where homes sell quickly, while a higher DOM might suggest a slower market or that a property is overpriced. For buyers, understanding DOM can help you gauge how competitive a listing is. For sellers, it’s a useful indicator to know if your home is priced right or if adjustments might be needed.

2. Months of Inventory (MOI)

Months of Inventory measures how long it would take to sell all the current homes on the market at the current sales pace. It’s calculated by dividing the number of active listings by the average monthly sales. A lower MOI (typically under 4 months) signals a seller’s market with high demand and limited supply. Conversely, a higher MOI indicates a buyer’s market with more options and less competition. This metric helps both buyers and sellers understand the overall market balance.

3. List-to-Sale Price Ratio

This ratio compares the final sale price of a home to its original listing price. A ratio close to or above 100% means homes are selling at or above asking price, which is common in competitive markets. A lower ratio might suggest buyers have more negotiating power. Knowing this can help sellers price their homes strategically and buyers make informed offers.

4. Absorption Rate

Similar to Months of Inventory, the absorption rate shows the rate at which homes are selling in a specific market over a set period. It’s expressed as a percentage and helps predict how quickly the market is moving. A high absorption rate means homes are selling fast, while a low rate indicates slower sales.

5. Median vs. Average Price

The median price is the middle point of all home prices in a market, meaning half the homes sold for more and half for less. The average price is the total of all sale prices divided by the number of sales. Median price is often a better indicator of market trends because it’s less affected by extremely high or low sales.

Why These Metrics Matter to You

Whether you’re buying your first home or selling your current one, understanding these metrics can empower you to make smarter decisions. They provide insight into market conditions, helping you know when to act quickly or when you might have room to negotiate.

If you ever feel unsure about what these numbers mean for your specific situation, our team at Nations Network is here to help. With years of experience and a commitment to your satisfaction, we’ll guide you through every step of your real estate journey.

Feel free to reach out anytime to learn more or get personalized advice. Let’s make your real estate goals a reality!