How to read a market update (and the five numbers I watch)
Median price gets the headlines, but it's rarely the most useful number. Here's what I actually track each month.
Every month you’ll see headlines about home prices going up or down. Median price is easy to report, but on its own it can be misleading. A few luxury sales can push it up, and a run of condos can pull it down, even if nothing has really changed for the typical homeowner.
When I put together a market update, these are the five numbers I care about most, and what each one tells you.
1. Months of inventory
How long it would take to sell every home on the market if no new ones were listed.
The traditional rule: six months is balanced. Fewer favors sellers, more favors buyers. Lately I’m seeing buyers gain leverage well below six, so I treat it as a guide, not a line.
Watch out for metro-wide numbers. Inventory can vary a lot by home type, price range and neighborhood, and one average hides all of it. That’s why I break it down for the area and type of home you’re looking at.
2. Days on market
How long homes take to go pending.
When this number starts creeping up, buyers are getting more selective, usually before prices adjust. It’s one of the earliest signals of a shift.
3. Sale-to-list price ratio
The final sale price compared with the asking price.
When homes sell above asking, buyers are competing. The further below asking they sell, the more room buyers have to negotiate. This tells you more about real negotiating conditions than any headline.
4. Price reductions vs. homes going pending
Each week, how many listings cut their price compared with how many went under contract.
This is the number I check most often, because it moves first. The more price cuts there are for every home going pending, the more leverage buyers have. When pendings outpace cuts, sellers have the edge. It often changes weeks before you see it in what homes actually sell for.
5. New listings vs. pending sales
Is supply coming on faster than buyers are absorbing it, or the other way around?
This is the trend line behind months of inventory, and it shows where things are heading over the next quarter.
What the numbers can’t tell you
Data lags. A sale that closes today was negotiated a month or more earlier, under different conditions. Interest rates are the biggest one. A home that closed in the spring may have been bought at a very different rate than buyers can get now. Same price, very different monthly payment.
That’s why I pair the numbers with what I’m seeing right now: how many offers a well-priced home is getting, how buyers are acting at open houses, and what other agents are telling me.
My monthly updates will cover all of this in plain English. If you want a read on your neighborhood or price range, just ask.
