This is Why Only Local Real Estate Information is Relevant

Funny you asked, I just wrote a blog post about it: http://www.ryanwardrealestate.com/WordPress/absorption-rates-what-they-are-and-why-they-are-important/

Days on market would just be the average time for a home to go from listed to under contract. Absorption rate refers more to supply and demand.

You may want to reconsider using the DOM from FMLS because it does not take into account homes that have been re-listed then sold. Those homes will increase your figure drastically. I saw somewhere a way to figure the true DOM, but I can't find it now.

You can get it from the statistical reports, but, it doesn't breakdown by "city". This is one of those things where, you get standard data and if you use the same stats consistently, you can gauge the market accurately. It's the same thing with sold price - it doesn't take into account costs paid by seller which lowers the "net" to seller, effectively lowering the value by that amount, but, if you are trying to gauge the market then all of the cities will average out expireds. We do it the long way for CMA's for sellers and buyers, but, for market snapshots, I think these work pretty well. For an individual home, you can look at the sold details sheet and it will have DOM and total DOM which includes if it has expired in the FMLS. It would be nice if they made it a bit easier to get that data for a custom report thoiugh... Let me know if you figure out how to do it!

The FMLS system will only recognize "Total DOM" if the listing was re-listed with the same MLS number. Most agents I know will re-list with a new number to give the listing a fresh look. Therefore, the number (average days on market) you are using from the FMLS statistical reports is not even close in my opinion.

When you do a market analysis for a client, you will go back and check to see if comps expired or were previously listed. This can be done quite easily and I always do it. In a general analysis, such as this one or the ones that you can get by reading the statistical reports that the FMLS publishes, they use DOM of sold homes that sold during the listing period of time. It isn't completely accurate in and of itself because of what you are saying. However, if you always use the same standards for the reports, you can look back and compare several months equally because you are using the same factors. This makes it useful to compare the current market against previous months. While true DOM is always going to be longer than what is indicated by the reports, I still think it provides solid data that is reliable to gauge the marekt by - as long as you always use the same standards. It's impossible to go through each sold listing, check to see if it was previously listed add that to each sold period and recalculate. It would take three days to do one city. I'm satisfied that because it's always the same standards that it provides a good reference point from which to gauge the market. If someone contacts me about something specific, I always go through and give a more complete analysis.

The only problem I have with quoting the FMLS averages is that it gives sellers (or potential sellers) a false sense of how long it will actually take their home to sell. Making both of our jobs that much harder. To figure true DOM: Absorption Rate X 30 = True DOM So, from your Roswell figures... 8.2 X 30 = 246 True Average DOM

What is the 30?

Matt, I just randomly checked 10 homes in Roswell that sold in October. Of the 10 I checked, 3 expired and were relisted and sold. 7 sold on the first go around. I'm not sure that I say 246 days. It's probably closer to 120, but, there really is no way to know for sure. Plus you can't count homes that expire and never sell because you what's wrong with those homes - their overpiced. So maybe there should be a caveat: If you price your home correctly, this is the average time it will take to sell.

30 = 30 days. I agree that this is not an exact science, but I do know that the FMLS averages are off. Most of the time, by a lot. This morning I took a quick look at all homes sold in Roswell the past year and there were several that had 550+ DOM...Ouch! Now remember that the 246 average is for ALL (million+ down to 100K or less) homes. If you did a more targeted search for say homes priced 300K - 400K then I agree that the average would be much lower than 246.

I still don't know why would multiply the absorption rate by 30 days to get days on market. These numbers really only apply to homes priced correctly. If you're overpriced, you don't sell. So the same home may have expired, but, usually at a higher price. Once priced correctly, they sell. Just because it was previously listed (at a higher price) and expired does not mean that it takes that long once price adjustments are made. So to count homes that are overpriced may not show good results. All three of my random sample had price reductions and then sold. I agree that they aren't perfect, but, they provide a baseline from which to view the market (of correctly priced homes). If nothing else we know one thing about expired homes. They are overpriced. So it may not be fair to use them for comparison in the market.

Ryan, how do you determine your Absorption Rate above?... and how is this different than Days on Market? THANKS

In a perfect world all sellers would take the advice of a professional Realtor® and price their homes correctly from the start , but unfortunately that's just not the case.

Ha! wouldn't that be nice.