Measuring Market Time
October 29, 2010 Leave a Comment
A question that frequently comes up is how to measure market time. The two main options are: (1) measure from the date of the most recent listing (2) if a property has been listed more than once (by the same or several agents) and the listings are close in time, then market time should be from the beginning of the first listing. I refer to this as “chaining” the listings together. Which is better?
There are arguments for both options. The argument for chaining is that some agents will deliberately overprice a listing and then re-list at a lower price. Re-listing, as opposed to doing a price reduction, will reset market time for the property back to zero in most MLS systems.
Some agents will price high just to get the listing. This is generally frowned upon, at least in part because if the property is not priced properly to begin with, it’s likely to be on the market longer before selling.
So scrupulous, professional agents prefer to measure market time via chaining because it shows up the people who are “behaving badly” … that is, it reflects the longer time the property spent on the market due to improper pricing.
On the other hand, when studying the market, we look at market time as an indicator of the balance between supply and demand. We’re not really interested in measuring bad agent behavior or unrealistic seller expectations. So if an agent priced a property too high and then relisted at a lower price, buyers were most likely unaware of the price on the initial listing.
So which is better? The answer is it depends on what you’re going to use the market time number for. If you’re trying to decide which agent is better, you want to consider the full market time of the chained listings. But if you’re trying to figure out the balance of supply and demand, better to use the latest listing only. That’s the only one the buyer saw.
