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The 4 MOST IMPORTANT Measurements That Define a “SHIFT”



How do you know the market has topped?

When the Sacramento area real estate market changes, does it happen all at once? Everywhere at once? What are the signs of a drop?

Is your area’s real estate market beginning to shift?

Depending on your neighborhood, your price range and your personal situation- it may be time to take a snapshot of the market and the trends…

The most difficult thing about a Real Estate Market shift is we NEVER know for sure whether we are in a slight market adjustment or a major market retraction or just a coincidental series of market events, until there is an undeniable amount of evidence.  And by then, the shift is over… the evidence comes after the fact, AFTER you can do anything abut it.

Real Estate Data happens AFTER the transactional instances that create that data.  Absorption Rate, Days on the Market, Months of inventory; they are all measurements of events.  These actions happen one at a time… One home, one family, one triumph or one calamity at a time.

How would you know if we are beginning a real estate market “shift”?  The answer is in the numbers, the reports that closed escrows and public records provide.




Just a few more homes on the market.

More homes “expiring” or going all the way through the listing period (typically either 120, 180 or 365 Days)

Just a little longer Average Days on the market.

A higher trending Months of Inventory.

Absorption rates that weakening.

An increase in price reductions.

Just a slight increase of homes “back on the market” which means more failed escrows.

The proof actually shows up 30 days late, it will show up in the reports and metrics that are measured by; Absorption Rates, Days on Market, Months of Inventory… (and what does that all mean?!?)

Here’s a quick guide to the measurements that define a “SHIFT”:

ABSORPTION RATE  A measurement frequently used to gauge the liquidity of a given market is the absorption rate. This is basically the rate in which a specific segment of a real estate market sells in a given time frame. As a generic term, Absorption Rate is sometimes used interchangeably with sales rate or turnover rate.

DAYS ON MARKET (DOM)  Are the number of days between a listing going on market and accepting an offer. The lower the average days on market figure, typically the stronger the buyer demand and the hotter the market. Note that this statistic is easily distorted by distressed home sales, which often have a very high DOM; by that minority percentage of listings that sell after multiple price reductions (one property that sells after being on the market for 12 months can sometimes play havoc with an overall average for a neighborhood); and by deals that fall through after offer acceptance (the listings come back on market and perhaps sell quickly, but the DOM clock keeping ticking throughout). Currently, appealing, well-priced new listings often accept offers within 7 to 14 days of coming on market no matter what the market is doing.

 MONTHS SUPPLY OF INVENTORY (MSI)  Reflects the number of months it would take to sell the existing inventory of homes for sale at current market sales rate or “TURNOVER” rate. Using the previous months number of sales, how many months would it take to sell all the homes available. The lower the MSI, the stronger the demand as compared to the supply and the hotter the market. Typically, below 3-4 months of inventory is considered a “Seller’s market”, 4-6 months a relatively balanced market, and above 6 months, a “Buyer’s market.”  DOM is only affected by the homes that actually CLOSE! So, the homes that sit for months and then go off the market unsold do not even show up in this metric. This is why DOM and MSI do not trend exactly. There is often a confusing disparity between DAYS ON MARKET VS. MONTHS SUPPLY OF INVENTORY

SOLD PRICE/ORIG. LIST PRICE DIFF. %   When a property is listed on the market, the list price may change couple times before it gets sold. The original list price is the price that is first entered to the MLS database when a property is listed on the market. The Sold/List Diff. % represents the percentage difference between sold price and original list of sold properties.

There are often huge differences between neighborhoods, price ranges, school districts… Huge disparities that you would never imagine.


What’s happening in your area? Do you know?


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