Days on Market trends and what they might mean for our market
By Lon Welsh
Your Castle Real Estate
 If you look at the chart to the right, on the top half you will see the average annual days on market (DOM) to sell a single family home from 1971 to present. On the bottom half of the chart is the average sales price for a single family home in the same time period.
The 1970s were a great time for our market: the average price went up 12 percent per year and the average DOM was only 56. The 1980s were a much rougher time for clients. The average appreciation slowed from 12 percent annually to only four percent. The average DOM increased from 56 to 85 days.
Near the beginning of the 1990s, Denver saw the creation of a lot of high-tech and telecom jobs. This demand increased the average home value nine percent per year, and the DOM fell from 86 to 46 days. Finally, when the dot com crash happened in 2001, the party was over and Denver lost many jobs. The average appreciation dropped from nine percent annually to three percent. DOM leaped from 46 to 84 days.
Here’s what is interesting: a major change in the DOM seems to occur before a big change in home price appreciation. Take a look from 1978 (45 DOM) to 1980 (85 DOM). The market rapidly slowed down. This also marked the end of the great home price appreciation in the 1970s. Similarly, between 1991 (75 DOM) and 1993 (45 DOM), the market rapidly improved. Home price appreciation took off in the 1990s. Finally, between 2001 (42 DOM) and 2003 (80 DOM), marketing times doubled as the local economy slowed down, and the home price appreciation also slowed.
What will happen next? If you look at the DOM chart, you can see just the first quarter DOM for the last few years. DOM declined in the first quarter of 2008 versus the same time period in 2007 from 100 to 95 DOM. January to May 2008 also declined compared to last year, from 100 to 89 days! It’s too early to call this a trend yet, but I’m optimistic that this is a leading indicator that our market is going to improve its rate of appreciation in two years or so. Let’s hope so!
Lon Welsh is the broker/owner of Your Castle Real Estate. His column features real estate trends impacting Aurora and the greater Denver Metro area. |
