Days on Market
Days on Market (DOM) measures the number of days a property listing remains active on the Multiple Listing Service (MLS) before going under contract. It indicates how quickly properties are selling in a specific area.
Key Takeaways
- Days on Market (DOM) tracks how long a property is listed before a contract is accepted, offering insight into market speed.
- A low DOM suggests high demand and a seller's market, potentially leading to quicker sales and higher prices.
- A high DOM can indicate lower demand, overpricing, or property issues, often found in a buyer's market.
- Investors use DOM to gauge market health, inform pricing strategies, and strengthen negotiation positions.
- DOM is a crucial metric for understanding local market dynamics and making informed real estate investment choices.
What is Days on Market (DOM)?
Days on Market (DOM) is a key real estate metric that tells you how long a property has been actively listed for sale on the Multiple Listing Service (MLS) until it goes under contract. It's essentially a stopwatch for how quickly homes are selling in a particular area or for a specific type of property. For real estate investors, understanding DOM is crucial because it provides valuable insights into market demand, pricing strategies, and negotiation leverage.
A property's DOM starts counting from the day it is first listed publicly and stops when a seller accepts an offer, leading to a pending sale. This metric helps investors assess the overall health and speed of a local real estate market.
How to Calculate Days on Market
Calculating Days on Market is straightforward. It's simply the number of days from the date a property is listed for sale to the date a purchase agreement is signed and the property goes under contract. Most real estate listing platforms and MLS systems automatically track and display this information for each property.
Real-World Example
Imagine a property was listed on January 1st, 2024, and a buyer's offer was accepted on January 25th, 2024. The calculation would be:
- Listing Date: January 1st, 2024
- Offer Accepted Date: January 25th, 2024
- Days on Market (DOM): 25 days
This property had a DOM of 25 days, indicating it sold relatively quickly in a market where the average DOM might be 45 days.
Why Days on Market Matters for Real Estate Investors
DOM is a powerful indicator for investors, providing insights into market dynamics and helping to inform various investment decisions.
- Market Demand: A low average DOM in an area suggests high demand and a competitive seller's market. Properties are selling fast, often with multiple offers.
- Pricing Strategy: If a property has a high DOM compared to similar homes, it might be overpriced. Investors can use this to identify potential deals or adjust their own listing prices.
- Negotiation Leverage: A property with a high DOM gives buyers more negotiation power. Sellers might be more willing to accept lower offers or concessions to close the deal.
- Investment Opportunity: Properties with an unusually high DOM might be overlooked by other buyers, presenting an opportunity for a savvy investor to uncover a hidden gem, especially if the high DOM is due to minor issues or poor marketing rather than fundamental flaws.
Frequently Asked Questions
What is a good Days on Market (DOM) for a property?
A 'good' DOM varies greatly by location, property type, and current market conditions. Generally, a lower DOM (e.g., 30 days or less) indicates a strong seller's market with high demand. A higher DOM (e.g., 60-90+ days) might suggest a buyer's market or that the property is overpriced or has issues. Always compare a property's DOM to the average DOM for similar properties in its specific neighborhood.
Does Days on Market reset?
Yes, DOM can reset under certain circumstances. If a property is taken off the market and then relisted after a specific period (which varies by MLS rules, often 30-90 days), its DOM count will typically reset to zero. This can sometimes be used by sellers to make a stale listing appear fresh, so investors should also look at 'Cumulative Days on Market' (CDOM) to see the total time a property has been listed across multiple listings.
How does DOM affect property value?
DOM doesn't directly affect property value, but it is a strong indicator of market perception and demand, which in turn influences value. A high DOM can signal to buyers that a property might be overpriced or have issues, potentially leading to lower offers. Conversely, a low DOM suggests strong demand, often resulting in competitive bidding and sales at or above the asking price. Investors use DOM to gauge how much negotiation room they might have.