Hey everyone, welcome back. Ready to dive into another deep dive? Today we’re going to unlock a key insight into the real estate market.
We’re going to give you a secret weapon for your investing strategy.
Oh, a secret weapon. I’m always up for that.
It’s all about understanding one often overlooked metric.
Okay, you’ve got me hooked. Tell me more.
It’s called total for sale listings, and it can be incredibly powerful when you’re making real estate decisions.
All right, total for sale listings sounds simple enough, but What is it exactly?
It’s really just a snapshot of all the properties that are available in an area at a particular time.
So, if I’m looking in a neighbourhood I want to invest in, I’d check out the total number of listings there.
Exactly. That’s your starting point. But it gets really interesting when you start tracking how that number changes over time, right? Like comparing this month’s number to the same month last year.
Exactly. That gives you a feel for how the market is moving. Is it heating up or cooling down?
So, a big jump in listings probably means things are slowing down, more of a buyer market.
You got it. More inventory usually means buyers have more choices, potentially more negotiating power, too.
That makes sense. And on the flip side, if listings are down from last year,
That’s when sellers start to smile. Fewer listings mean less competition, potentially leading to those bidding wars.
So, we’re talking about higher prices, right?
You got it. It’s all about supply and demand.
Okay. So, are there any magic numbers or percentages we should look for when analysing the total for sale listings? I mean, Yeah, there are some good rules of thumb to keep in mind. Generally, a year-over-year increase of less than 10%. It could signal a balanced market or maybe a slight advantage to sellers.
So, a small increase is nothing to panic about.
Exactly. Especially if other factors in the market are looking good.
So, if I’m seeing a 10% increase in listings, that alone shouldn’t scare me off,
right? It’s all part of the bigger picture.
Okay, I’m starting to get a feel for why this total for sale listings metric is so important. But you keep mentioning these other factors. What else should we be considering alongside this magic number? You know, I love connecting the dots. It’s like putting a puzzle together, right? What other pieces do we need to complete the picture?
Well, alongside total for sale listings, you’ve got days on market and you’ve also got the absorption rate. Those are both really key.
Okay. Days on market. I think I get what that one means. It’s how long it takes to sell a place, right?
Yeah, exactly. Just the average number of days a property is sitting on the market. before it finally goes under contract.
So, if I see houses in a neighbourhood just sitting there for months and months, is that like a red flag? Like maybe a buyer market.
Yeah, it definitely can be. A longer days on market, that usually means buyers are taking their time. Maybe they’re not feeling the pressure to jump in right away,
right? They’ve got options. They could be picky. And on the other hand, super short days on market, like a couple of weeks.
That’s a classic sellers market signal. Homes getting snapped up fast.
Got it. Low inventory, quick sales. That all Makes sense. So that’s days on market. What about this absorption rate? That one sounds a little more, I don’t know, technical.
It’s not too bad really. Think of it this way. It tells you how fast those homes are selling in a particular market. Basically, it’s measuring how much demand there is.
Okay, so how do we figure out the absorption rate? Give me an example.
Okay, let’s say last month there were 100 homes for sale in a neighbourhood and out of those 20 of them sold. To get the absorption rate, you just divide the sales by the total number of listings.
So in this case, 20 sales divided by 100 listings. That’s
20%. Exactly. An absorption rate of 20%.
So the higher that absorption rate is, the faster those homes are flying off the market.
You got it. A high absorption rate, especially when you see it with low inventory and short days on market. That’s a pretty clear indicator of a strong sellers market.
It sounds like these three metrics, total for sale listings, days on market, and absorption rate, they all kind of work together, right?
Yeah, absolutely. They paint a much clearer picture than any one number could alone.
Okay, so we’re getting all this great info, but let’s bring it back down to earth for a second. Why does this matter for me as an investor?
Well, because it can save you a lot of heartache and a lot of money. This isn’t just some abstract real estate theory. This is about making smart decisions.
So, instead of just going with my gut, I can use this data to make more informed choices about when to buy or sell.
You got it. And potentially avoid some costly mistakes. Okay, I’m all about avoiding mistakes. So, give me a real world scenario. How could misunderstanding these metrics actually hurt me? Like, walk me through. Yeah, I need an example. Help me really visualize this.
Okay, let’s say you’re I don’t know, you’re excited about this neighbourhood. Everyone’s talking about it. Seems like the place to invest. You find a property you like, but you don’t really dig into the data.
You’re saying I skip checking the total for sale listings and the days on market and all that.
Yeah. You get caught up in the excitement, end up paying top dollar, maybe even get into a bit of war.
Okay, I can see where this is going. So, I buy the place. Feeling pretty good about myself. What happens next?
Well, a little while goes by. You start to notice more and more for sale signs around the neighbourhood.
Oh,
Days on market start creeping up. You hear whispers of price cuts. That hot market, it’s not so hot anymore.
So, what I thought was a great investment could actually turn out to be a losing proposition.
It’s definitely possible, especially if you overpaid at the beginning. or if the market really takes a dive.
So, these metrics, they’re like early warning signs. Help you see what’s really going on.
Exactly.
Wow. Okay. So, just to recap, we really dug into this idea of total for sale listings
and how it can give you a glimpse into the real estate market’s future.
Right? We talked about those benchmarks, that 10% increase, the 20% jump, and how those can signal a shift in the market.
And we can’t forget our other metrics, days on market and absorption rate,
right? Our trustee sidekicks give us that extra layer of insight.
All of it working together so we can understand those forces, those dynamics that really drive prices.
This is why we do this show, giving you the knowledge, the tools to be a smarter investor, and make those informed decisions.
You know, so my final thought for everyone today, we’ve given you the road map, but remember real estate, it’s local.
So important to keep in mind what’s going on in your neighbourhood, in your city might be totally different from the national trends. Exactly. So, take what you’ve learned today and dig into your local market. Check out those total for sale listings. Don’t forget about days on market and absorption rate.
And remember, real estate investing, it’s a marathon, not a sprint.
Love that.
Be patient, stay informed, and use this information to your advantage. Well, that’s all the time we have for today’s deep dive. Thanks for joining us. Remember, the world of real estate, it’s full of opportunities. Keep learning, keep exploring, and we’ll see you in the next one.
