Market shifts: Understanding ‘leading’ indicators


Each week, real estate professionals are asked the following question: How is the real estate market doing? The answer given most often, if statistical in nature, generally refers to the following two categories:

What is my home worth?

Home sold (are units up or down?)

This certainly makes sense from the public’s point of view. This type of information gives an overall sense of what is happening, and depending on the answer can make you feel comfortable or uncomfortable with the current state of the market. But here is the challenge: This type of information is considered a “lagging indicator.” That means it has already happened – great for an overview, but not if you want to determine the direction of the market.

What we have learned from the past is that national shifts in the real estate market occur somewhat gradually. From a local standpoint, however, the change can be swift. How do we ensure that we are keeping an accurate pulse on the direction of the real estate market? The answer to that question is to start understanding leading indicators. Here are two leading indicators our agents study to get a better feel for our market:

Number of showings each month

Days on market for our listings

Let’s take a look at both measures, starting with the number of showings. Each month, I track the number of showings that our listings have scheduled. Our office carries more than 400 listings, so this measure is statistically significant. If our showings are even or up, it is most likely safe to say that our market is healthy. If I see a dramatic drop or even a dramatic rise, that could be cause for concern.

I can report that as of June our number year-to-date is up from the same time period in 2015. This should come as no surprise to most. Now, this is not the be-all, end-all to understanding the market overall, but a key component in determining a shift.

Once a listing is posted in the MLS, the number of days to sell the home is tracked. This statistic is called “days on market.” Obviously, if that figure starts to rise or fall, that also could be a warning that a shift is on the way. It is a key discussion point when agents list homes.

For the listings sold in our MLS, “days on market is down 9.1 percent from 2015 YTD. This is not a sign of a shifting market. As a whole, our market continues to appear healthy.

Please keep in mind that to truly understand what the market is doing, you do need to study it. Certainly, there is more than one measure that is required to understand if our market is shifting. For instance, our overall market could be up 4.7 percent in closed units, but certain regions of Northeast Florida could be down.

That is why it is critically important to establish solid relationships with real estate professionals. They have instant access to this information and can assist in making wise choices when it comes to purchasing or listing a home.

Mark Dilworth

Managing Partner

Keller Williams Atlantic Partners

Jacksonville Beach/Amelia Island/St. Augustine