Years ago, I heard a well-respected trainer (David Knox from the USA) use this term and have adopted it since.
It isn’t mumbo jumbo, it makes perfect sense.
How many properties in a particular market segment can a market absorb over a given time?
This is very important to understand how many sales in your market segment have occurred in the past 6 months.
Or given period and how many competing properties are on the market right now.
The alternative is to be blinded as to the state of the actual competition and/or having inappropriate or incorrect expectations around timing and strategy, required to stand out in a competitive market.
EXAMPLE: (Let’s say your property sits at around $1.5M) It could fit either into the $1.25M to $1.5M market segment, or the $1.5M to $1.75M one. It can be helpful to analyse in this example what is happening in both segments.
E.g. If 12 homes are on the market at a particular time of a particular type or price range (Insert any number, it doesn’t matter).
What we want to know is this;
As a seller, I would want to know that if I were coming onto the market.
Those 11 others are all competing with yours if you were one of the 12 on the market.
No property is ever selling in isolation, it is always in competition to everything on the market.
Many years ago, I started using a term which I called “Market segment” in response to the recognition that the spread of price range in prestigious suburbs like Applecross, Mount Pleasant and Attadale etc. was huge.
You could have properties for $400,000 right up to $10M plus.
So, when buyers ask me things like “What is the average price per sqm of land in Applecross?”
Or I see reports of official data such as “the average days on market was 63 days”, sometimes I want to either laugh or scream or reach for a bucket.
>There are so many variables.
The reality in the areas I work (Mainly City of Melville) it is never the norm or the same as that reported as “average”.
There is no sensible way to talk norms or averages in areas that has such a massive variation of properties and values.
I often see some price categories (Market segments) take 300 plus days to sell & sometimes we see properties on the market 3 or more years.
I also see a huge manipulation of data by some reporting, depending on who you listen to.
There are many tricks to artificially reduce days on market.
A property listed with 3 agents for 100 days each…
I regard that information as incorrect; the real figure is 303 days.
ALSO, properties can be pulled up and down off the internet or signs come off or up (at Agent will) yet are never really off the market.
“Coming soon” or “Market launch date” is sometimes another way to try to create a perception of lower days on market.
We correctly and accurately record the very first date a property is ever seen in the market as the launch date.
I hope these points have been helpful.