Tuesday, September 04, 2007

Understanding Real Estate Market Statistics

I've been tracking real estate stats for most of my career. I knew what numbers I wanted to collect and how to interpret the trends; but I had difficulty explaining my reasons to potential clients. That was until I spoke with my friend Denise Lones about two years ago. Denise's premise: listings show supply, pendings show demand and closings show historical sales is a simple but insightful way to explain this.

There are several factors you should consider:
  • Kitsap County's real estate market is regional
  • Within Kitsap County there are multiple real estate markets (i.e., waterfront, view, single-story, acreage, neighborhood, size, etc.)
  • Kitsap County's real estate market is constantly fluctuating
  • To understand Kitsap County's real estate market you need to constantly track real estate supply and demand statistics

One of the best ways to track supply and demand in the real estate market is to understand "pending" numbers (those properties that "go under contract" in a particular time period). There is no better indicator of how the real estate market is doing right now than pending home sales for a specific period. For example, there were 142 active listings in Silverdale as of two days ago and there were six properties changed to a pending status the previous week. Dividing 142 by six equals 23.7 which is the number of weeks of inventory available for sale.

The key to this whole process is to keep track of the trend, whether the active inventory is increasing or decreasing. But you don't need to make these calculations because they're available through my website using the Market Statistics button.

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