What does Days On Market really mean? Here’s The Truth

It means almost nothing, especially on a large scale.  In real estate we try to find numbers that normalize the ups and downs of activity.  Similarly, the inventory number is a theoretical number that says, if sales continue at this pace and no new homes were added to the market, this is how many months it would take to deplete the inventory.  That situation would never happen but it is a number to look at to show trends but it’s not perfect. Just like Days On Market (DOM) which points to the amount of time on average that it takes to sell a home.  DOM is a crude number that I have never liked but it can show a trend just like the inventory number.

Here are the average DOM’s  for all of SE Portland for the following months,

May 2011 251 homes sold in 85 days
May 2013  269 homes sold in 37 DOM
May 2013  279 homes sold in 36 DOM

Now, most news outlets or Realtors, don’t bother to tout the local neighborhood numbers. We go with the easy Portland Metro area number.  In May of 2011 the DOM for all of Portland Metro was 145 days which is a big discrepency.

These numbers point at a totality of an area and mix in the amazing homes and the horrible homes.  The ones that took 5 price drops and the ones that sold in a day because they were underpriced. And this is what confuses Sellers. They see 145 days reported and say, “Well, I will price it high and then drop it over time.”  It’s a self-fulfilling prophecy and they are on the market much longer. 

So what number is the one to pay more attention to in most cases? The median number. For those that don’t know, the median is the half way point. Half sold at or below the number and half sold at or above that number.

Median DOM’s for SE Portland

May 2011  51 DOM
May 2013  10 DOM
May 2014 8 DOM
May 2015 6 DOM while the average DOM for Portland Metro is 55 days.

Better information leads to better decisions.