Image: Dafne Cholet/Flickr
First impressions matter in real estate – whether it relates to curb appeal, price or how long a home has been on the market. The latter, which is referred to as days on market, can have a huge impact on how buyers perceive a property and serves as a key metric in housing market analysis.
Days on Market: Definition
Days on Market (DOM) refers to the period of time a property is active on the Multiple Listings Service before a sold firm transaction occurs and the home sale becomes legally binding – with any stipulated conditions having been met by both the seller and buyer. Simply put: it’s a measure of how many days a home takes to sell.
Arguably the second most referred to real estate statistic, behind price, of course, days on market is closely eyed by run-of-the-mill buyers, veteran investors and industry insiders alike.
The faster properties sell (and the lower the DOM), is an indication housing is strong, supply is tight and conditions are those of a seller’s market. Higher DOM tends to suggest a buyer’s market.
While several real estate websites do not display DOM, withholding information from would-be buyers, TheRedPin.com shows days on market for all MLS listings.
Days on Market: Statistics
Real estate in Toronto is at its highest levels in history. In April alone, the average price of a GTA home leapt a whopping 16 per cent year over year.
Along with spikes in prices, the heated market has also seen a huge dip in the amount of time a property takes to sell. After comparing days on market data for the past eight years, we found average DOM has plummeted over 40 per cent in the GTA.
The graph below shows days on market data from April 2008 to April 2016.According to statistics from the Toronto Real Estate Board, detached residences take the fewest days to sell while condominium apartments take the most. Based on figures from April 2016, DOM sits at 13 days versus 25 for each respective home type.
Seasonality also has a big influence on days on market, especially when pitting the frigid cold winter market against spring. After analysing six years of GTA housing figures, we at TheRedPin found:
Days on Market: Reset and Relisting
From the very first day, a for sale sign is perched up on the lawn and your listing is on MLS, motivated buyers scoping out the neighbourhood notice. Whether they received a heads up from their agent or through an email update, you can expect private tour and open house attendees to start rolling in by the first week.
Conventionally, a property receives the most exposure in its first three weeks out on the market.
If the buzz around your home is low after the first month, and few motivated buyers show interest, days on market can quickly accumulate.
The higher the days on market, the less desirable a property can appear. Speculation behind why a home is “lingering” can foster and momentum for a sale can slow. Some buyers may assume the seller is desperate or there are issues with the house driving away offers.
When a property fails to find a buyer after a set amount of weeks or months, many sellers subscribe to the strategy of pulling their home off the market only to promptly list again with a new MLS number (and often, a different price tag). It’s a common move used to reset days on market and make a listing appear brand new.
According to a study we conducted, around 1 in 6 homes in the Greater Toronto Area were relisted in 2015. That means at least 17,000 homes had their days on market reset. Our analysis also found sellers waited an average of thirty days before withdrawing their home off MLS and listing again.
There are several factors that could cause a home to linger and drive a seller to reset its days on market. Chief among them is too high of an asking price. A handful of other factors come into play too, such as how hot (or cool) the market is, the condition of the home, whether it was staged to sell or a seller’s lack of availability for showings.
Another reason days on market may be reset is that a listing simply hit its expiry date and is removed as an active home for sale on MLS.
When does an MLS listing expire? There is no one-size fits all answer, as it depends on what you and your agent contractually agreed on. However, the standard period generally falls around three months.
If you’re a buyer intent on a particular home and want to see whether its days on market was reset, your realtor can easily provide you with that information.
Days on Market and Lowball Offers
Along with too few offers, a home that has accrued sixty or more days on market without a price change can be prone to receiving lowball offers.
Buyers looking to bargain often view high DOM as a sign of inactivity and a seller who is eager to close (even if that’s not necessarily the case), and in turn, make offers considerably below asking.
If you’re a house hunter looking to lowball a seller because of their high days on market, it’s important to first consult with your realtor. An agent can help identify how long similar homes in the area took to sell and whether a lowball offer is really the right decision.
It’s critical that buyers recognise there is no rule of thumb which states “a home on the market for X days is ripe for a low bid.” For example, if a property’s DOM has climbed to sixty but nearby homes took an average of ninety days to sell, a bargain bid probably isn’t the right move.
Every home and neighbourhood are unique, so while higher DOM is generally a sign the seller is facing some hurdles, a lowball offer isn’t necessarily a no-brainer decision.
Want to get started on your home buying and selling journey? Give us a call at 416.800.0812 and check out TheRedPin’s listings page