Days on Market and Days IN the Market

We often hear the term ‘Days on Market.’ This is one measure that can be effectively used across a data set to measure the health of a property market.

Melbourne is a little bit more unique than other markets because we sell via auction method for a significant percentage of property sales. Unless a Vendor is tempted to accept a pre-auction offer, the minimum ‘Days on Market’ timeframe is at least 23 days and more likely to be around 28. If the mean ‘Days on Market’ for a given market is reduced, we can assume that demand is high and supply is limited. In a market like Ballarat where ‘Days on Market’ are particularly tight right now, we can see the correlation for house price growth.

While ‘Days on Market’ reflects supply and demand, what does ‘Days IN Market’ reflect?

How long does it take to buy a property? Naturally, the answer will be very different for every buyer. Our statistics from 2017 revealed an average timeframe of 6-7 weeks between the date a client signs our authority to the date of sale for their purchase.

As expected, home-buyers took a little longer with an average of around 12 days longer than investors.

When we start working with a new client, as a general rule of thumb we usually suggest that our shortlisting and inspection journey will likely last somewhere between 3 weeks and 3 months pending the time of year. Seasonability plays a huge part in the timeframe for a successful purchase; January is typically a block out month with the Melbourne property market grinding to a halt, and winter is a difficult month for buyers due to lower supply and a higher demand to supply ratio for property. 

But in the Spring and Autumn seasons a feasible brief should not take months on end, assuming the buyer is both financially and emotionally ready.

Being ‘financially ready’ is the easy part, although requires a considerable amount of organisation. Getting a pre-approval in place and understanding the importance of cash flow is a relatively straightforward process, especially with the help of a competent mortgage broker or banker.

Where buyers are challenged is often at the decision making part of the process, once they’ve started inspecting and shortlisting viable properties.

One of our shortest assignments (a mere eight days) involved us helping a young couple buy their first home. They had their financial ‘ducks in a row’ and had a firm understanding of their ‘must have’ and ‘nice to have’ criteria. They’d scanned through the sold section of online portals and determined the locations and type of dwellings which fit their brief and budget.

On paper, they were ready to start their inspections. As luck would have it, their first weekend delivered a property which ticked almost every box. Our dilemma was that they had only just started, and in their minds it was perfect, but they questioned whether something even better would appear online next week? They feared that they would be rushing into things if they pounced on the first property they liked and they wondered if they should pass up the opportunity and continue to canvas the market in an effort to to glean a better understanding of how this property compared to other properties.

Our solution to overcoming our clients lack of exposure to the market was to not focus on what might happen in the future, but to analyse what has happened in the past. Their homework was to filter through the list of properties which had sold in the last 12 months that fit their criteria, location and which fell within budget.

It soon became clear that this property scored significantly higher than almost every other sale in the area, demonstrating the low likelihood of finding a superior or equally suitable property in the near future. The clients made the decision to go ahead with the purchase, and interestingly  this decision was later reinforced by a comparable but more dated property selling nearby for an additional $32,000 two months later.  

‘Days IN Market’ is based on a combination of five things;

• Overall market strength
• Seasonality
• Preparedness for the search (particularly a preparedness for understanding property values in the search band and criteria nominated), 
• Buyer motivation (some buyers aren’t emotionally ready to commit yet despite saying they want to buy)
• and luck

Luck does play a role, but not a major role. Being mindful of seasonality, market conditions and stock fluctuations in a given area is important, but being prepared and realistic is the significant ingredient in this cocktail.

This article was proudly penned by Amy Mylius.