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 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.
The reality for me in the areas I work 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 divide Applecross into 10 segments, essentially to make some sense of what was happening simultaneously in the same suburb, depending on price. I measure days on market for unsold stock, sold stock, average and median values and days. It paints a vivid picture of contrast, and is fascinating to monitor and understand.
All buyers and sellers must understand this concept to fully appreciate what is really happening in that respective market at that time.
I often see some price categories (Market segments) take 300 plus days to sell, and sometimes we see properties on the market 3 or more years.
The simple explanation of this valuable concept is this. If a particular market can absorb 12 sales a year of a particular type/style of property, and there are 20 on the market right now, it would take 20 months for the market to absorb (Sell) all 20 without any changes to the market, or no new stock coming on.
In layman terms, the terms oversupply or under supply are a more general term for this phenomenon, whereas absorption rate is more quantifiable.
This is very important to understand how many sales in your market segment have occurred in the past 6 months, and how many competing properties are on the market right now.
DAYS ON MARKET: – How accurate is it?
We also see a huge manipulation of data, depending on who you listen to. There are many tricks to reduce days on market which make a lot of industry data inaccurate and even irrelevant.
Did you know?
A property listed with 3 agents for 100 days each, that changes agents as soon as the listing expires, and sells with agent number four in 3 days, is recorded as selling in 3 days. 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. You see them go up again with the same agent a week later as “new” online. That is manipulation of data and not accurate. We regard that as not a new listing at all.
A property totally off the market for 60 days or more (Off all websites, sign down and out of the agent window) is considered 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 record the very first date a property is ever seen in the market (Be it sign, internet with an address or not, or any print media, as launch date).
If you would like a detailed explanation of any of these terms and how they relate to your specific property, and even more how it would affect your strategy, please drop me a line.