Real estate agents know how important it is to keep up with national and local market data so they can serve their clients. Yet it can be confusing to know exactly what to do with all the information. This article will help you understand how to interpret inventory, months of supply, and pace of home sales data and see how together, all of this data can help you shine in your listings presentations and boost your performance.
The Facts: There are 2.3 million homes listed for sale in the U.S and they are selling at a faster rate than in 2012.
Inventory: In September 2014, there were 2.3 million homes available for sale in the U.S., which is down slightly from August 2014. A decline is expected this time of year as home sales slow down in the fall and winter months. Looking at September 2012 inventory levels, we see that even though units available is down from last month, it is up 6% from this same time last year.
Months of Supply: Nationally, we have 5.3 months of supply of inventory. This means that if no new homes were listed, it would take 5.3 months to sell all 2.3 million homes currently listed. This figure indicates we are moving toward a balanced market and as a result we can expect to see price changes around 4-6%. Read our recent discussion about price change and what it means for your clients.
Demand: In June 2012, there were 2.4 million homes on the market with 6.4 months of supply. Looking at September 2014 units available, we see it is almost the same as June 2012. However, the months of supply is 5.3. How can there be almost the same number of units on the market today as there was in June 2012, but the months of supply is different? The answer is that in 2012, fewer homes were selling per month than are today. When looking at inventory and months of supply, you also have to take into consideration the rate at which homes are selling in your market.
Evaluating all three of these components together, gives you the most accurate picture of the current market and it helps you compare your performance against the market.
The aha: If listings are up locally, your listings should also be up and your market share increasing.
How many listings did you have in September 2013? How many listings did you have in September 2014? What is the percentage difference? Now, look at your local market data and ask the same three questions. If your listings increase is on pace with the area’s listings increase, congratulations! If your listings are not increasing at the same pace as your local market is increasing, you might have missed some opportunities for listings and lost market share. Don’t worry. Here are two steps to help you seize more opportunities in your market and increase your listings.
Step 1: Collect your monthly local data and understand it. Every month you should look at the number of homes listed in your area and compare that to the same time last year. Set calendar reminders each month to remind yourself to gather the data from your local real estate board. Then, look at the months of supply inventory number to get an idea of the relationship between supply and demand. Knowing how inventory and price changes work together can help you accurately price your listings and educate your clients on the rationale for your recommendations. By combining this information, you can incorporate it into your listings presentations and present the most accurate market representation to clients. You can also use this information to guide your marketing plan and keep yourself and your clients on track for success.
Step 2: Create an action plan based on your market trends. Once you have collected and analyzed the data, you can gauge where the direction of inventory is headed in your market. It will also give you a better idea of what price changes can be expected in the next month. For example, if your market has only 1-2 months of supply for several months, this means prices will soon drive up because there is not enough inventory to meet demand. On the contrary, if you are in a market with a larger monthly inventory supply, you can expect home prices to dip. Depending on how your market is trending, create listing presentations with recommendations that fit the trend. Give your clients the up-to-date data and show them how you plan to use it to market their property so it can outperform. Use the Keller Williams models and systems and combine them with current market data to help you stand out as the most trusted and most knowledgeable agent in town.
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