How to Understand the Real Estate Market Like a Pro

Mar 6

Much of my value as a real estate professional is delivered through coaching and educating my clients. It brings me joy to witness my clients' confidence blossom as they gain the tools and knowledge to navigate the intricacies of real estate. Below, I've outlined and defined the basic elements of understanding real estate market activity and its patterns.

1. Median vs. Average Home Price

Median Price: The “middle value” of all homes sold (half sold for more, half for less). Typically, this is a better indicator of the typical home price since it’s not skewed by fixers or overpriced homes.
Average Price: The total sales price of all homes divided by the number of sales. This can be misleading if there are a few very high or low sales.

2. Days on Market (DOM)

The average number of days a home stays on the market before going under contract (AKA the seller accepts an offer from a buyer).
Lower DOM = Homes are selling quickly (stronger seller’s market).
Higher DOM = Homes are sitting longer, possibly indicating a buyer’s market.

3. Months of Inventory (MOI)

Measures how long it would take to sell all the homes currently on the market if no new homes were listed.
Less than 3 months = Seller’s market (low inventory, high demand).
3-6 months = Balanced market.
Over 6 months = Buyer’s market (more supply than demand).

4. List-to-Sale Price Ratio

The percentage of the asking price that homes actually sell for.
Above 100%: Homes are selling for more than asking (bidding wars, competitive market).
Below 100%: Homes are selling for less than asking (buyers have more negotiating power).

5. Price Per Square Foot

Useful for comparing similar properties in the same area.
A rising price per square foot suggests increasing demand or higher-end homes being sold.

6. Pending Sales vs. Closed Sales

Pending Sales: Homes under contract but not yet sold (a leading indicator of future closings).
Closed Sales: Homes that have officially sold (represents past market conditions).
A decline in pending sales may indicate a slowdown, while an increase suggests a hot market.

7. New Listings vs. Active Listings

New Listings: Number of homes recently listed for sale (homes are most often listed on Thursdays and Fridays, so they are fresh to the market for open houses and touring on the weekend)
Active Listings: Total number of homes currently on the market.
If new listings increase but homes aren’t selling, inventory builds up, signaling a possible shift to a buyer’s market.

8. Interest Rates & Their Impact

When interest rates go up, buying power decreases, often slowing home sales. This has been the climate we have been in for the past few years. We typically see a swing toward buyers being able to negotiate more and secure homes at a lower price due to less buyer competition.
When rates go down, more buyers enter the market, increasing competition. For those “waiting on the sidelines” for rates to go down, are likely to find increased competition of other buyers waiting to do the same, and an increase in home prices to offset the lower rates.

9. Market Trends & Seasonality

Spring and summer generally see more listings and higher prices.
Fall and winter often bring fewer buyers, making it a better time for “deals” and buyer opportunities. I always tell my buyers that if the seller is listing their home over the holidays, then they NEED to sell. Nobody likes moving during the holiday season!
Year-over-year trends are more reliable than month-to-month fluctuations.

10. Inventory Turnover

When evaluating neighborhoods, take a look at how long people tend to live in their homes before selling and, in general, how many homes are currently listed for sale
Areas with high turnover may indicate nuanced elements of the area that are not immediately apartment to some buyers (freeway noise, packed on-street parking when getting home from work, home is on a flight path, etc).
Neighborhoods with lower turnover tend to have lower DOM when homes sell, as there is less competition and likely a pent-up buyer demand for homes in that area

I hope you gained some insight from these points and have a clearer understanding of the nuances of real estate market data. If you have any questions about Portland's current market and what opportunities are out there, please reach out! I'm happy to have a zero-pressure exploratory conversation to see what makes sense for you (even if that means staying exactly where you are!).

Your friend & realtor,

Sofi