Days on market and current activity Washtenaw County, MI
Based on my experience, as days on the market for a property decreases, prices tend to increase. When days on market start to increase, prices tend to stabilize or decline.
One of the largest obstacles in measuring market direction is that closed sales are usually contracted for sale one-to-two months earlier than the closing. As such, the closed sales data lags even with the most recent data available. Including contracted sales would indicate a higher number of days on the market, but as many contracted sales do not close, the data below includes only closed sales, and absorption is addressed further in this discussion.
The chart above is a compilation of the different school districts in my local area, Washtenaw County. The data refers to days on market of sales, ran in an annualized manner. In other words, each data point is one years’ worth of sales but presented month-by-month. This helps eliminate the seasonality that we see as our market normally slows down after Labor Day and start to pick up in February.
What is noticeable at first glance is the convergence of days on market to a low point around June to July 2013 and a steady increase in days since August 2013. All districts are showing an increase in days on the market other than Manchester, and are mostly back to levels seen in late 2012/early 2013.
After examining the days on market, the next step is to look at how many sales occurred in the most recent period in each market (all of 2013 in this case) and then look at how many are on the market, not under contract, within the first two weeks of 2014. This information provides an estimated supply based on the most recent years’ worth of sales. The last column that chart is the contract-to-listing ratio (CLR) which simply looks at all offerings and compares the number under contract to the total number available and derives a percentage of absorption. From my perspective, a market that is active is normally hovering around 30% CLR and when it pushes upwards to 40% or over, is very active and a seller’s market. Conversely, when it is 20% or below it is much less active, and much less than 20% indicates a buyer’s market. Of course the ratios are all dependent on agents reporting contracts within the required period of their MLS so that it is not lagging by more than a couple of weeks.
At the same time that the number of days on the market declined in most areas, the number of sales increased. For example, Ann Arbor went from 805 arm’s length sales in 2011 to 939 in 2012 and 1,086 in 2013; yet in 2013 days on the market was virtually identical to 2011 (although it was lower in 2012). Ypsilanti went from 115 sales to 158 to 220, almost double the first year reported, yet days on the market dropped. In each market shown, the number of arm’s length sales rose in this period.
All data is gathered using the Ann Arbor Board of Realtors MLS. Sales data excludes distress sales and GLR MLS but does include Realcomp and therefore there is some duplication of listings throughout. This is not considered a significant sampling problem due to consistency in application throughout all market segments and current/contract offerings. Data run from 1/2/14 through 1/11/14.
Based on this information, my interpretation is that Ann Arbor looks like it is still very strong, and Lincoln appears to be in the throes of a seller’s market at the moment. Chelsea, Dexter and Saline are in the 20% range, meaning slow but a balanced market, and Manchester and Milan may have crossed into being a buyer’s market at this time based on these ratios.
Note, in each market run, the entire school district is examined, not submarkets. In an appraisal, the appraiser will look at the submarket, or “micro” market that relates to the subject property. If you are interested in knowing how your property adds up in today’s market, contact your local real estate expert for an analysis.
Enjoy – Rachel Massey www.annarborappraisal.com