I am often asked how the market is doing. There is much more to this question than many realize.
The number of factors that go into what drives a market is quite vast: supply, demand, where the supply is coming from, the rate at which supply is coming on the market, the rate they are selling, price fluctuations, etc.
So how do we see trends and how can we take advantage of them?
This is where stats can help with some of that organization of data.
For today's article, I will focus on the stats generally used in the real estate world to convey an overview of what the market looks like.
One of the stats that is widely used is avarage home price. This is the average sales price for homes usually within the last month. They are often compared to last month's or last year's numbers to show a short term or longer term trend.
Though this does give you an idea as to where the market is roughly, take it with a grain of salt in a smaller market like the Sunshine Coast. A new development hitting the market with higher or lower priced properties could skew the numbers or we could have a particularly slow month where the market could actually be affected by just a few sales, especially if they are particular outliers in terms of price.
It is also good to look out to see if it is an average sales price or a median sales price.
A median sales price shows the exact middle value of all the sales and doesn’t take into account the amount the others sold for.
For example, if 11 houses sold, the median would be the 6th house in the list independent of the values of the other houses whereas the average takes all of the values into consideration.
The next stat is the H.P.I. or Home Price Index.
CREA.CA states, “The MLS® HPI is based on the value home buyers assign to various housing attributes, which tend to evolve gradually over time. It therefore provides an “apples to apples” comparison of home prices across the entire country.
The MLS® HPI is based on the value home buyers assign to various housing attributes, which tend to evolve gradually over time. It therefore provides an “apples to apples” comparison of home prices across the entire country.”
For more information on the H.P.I., check out the CREA page: https://www.crea.ca/housing-market-stats/mls-home-price-index/
Have you often heard about the labels buyers market, balanced market, or sellers market?
Do you know where they come from and is there a specific number that defines them?
There are a few different ways to determine which market we are in and though they use the same logic, they have slightly different formulas to reach the answers.
So it is pretty obvious what sellers and buyers markets are; sellers market is where the sellers have an advantage because inventory is low and a buyers market the buyers have an advantage because there is a lot of inventory and they have the advantage.
To determine how much inventory you need for each, the first technique is to calculate the months of inventory, or MOI. You take the number of listings currently on the market, divide it by the number of sales (usually from last month as stats are always released at the end of the month) and that gives you your MOI number.
Any number over 6 it is deemed a buyers market. There is enough inventory that at the current rate of sales, will last 6 months if no new listings become available.
And MOI between 5 and 6 is a balanced market. This is a typical market where neither the buyer or seller has a particular advantage.
And if the MOI is under 5, it is a sellers market as inventory is dropping to the level that demand is rising and listings are selling faster.
To put this year’s spring market in perspective, March of 2020 had a MOI of 1.6.
The other common way to calculate it is sales to listing ratios. You divide the current number of NEW listings by the number of sales from last month.
If the number is over 60% it is a sellers market, balanced being 40-60% and under 40% a buyers market.
To check out the stats for yourself, check out https://www.rebgv.org/market-watch/summary-of-homes-listed-and-sold.html
If you would like more information, please reach out to me, email@example.com.
If you are thinking of selling your home, please feel free to contact me for a no-obligation, free home estimate of what your home is worth in the current market.
CREA.CA (2021) What is the MLS® Home Price Index (HPI)? -https://www.crea.ca/housing-market-stats/mls-home-price-index/
REBGV.ORG (2021) Summary of Homes Listed and Sold - https://www.rebgv.org/market-watch/summary-of-homes-listed-and-sold.html