Raw vs. "Massaged" Real Estate Data

City Lakes November Showings

It's easy to get overwhelmed by real estate statistics -- even for professionals.

For starters, there's monthly sales data; "pending" sales data (under contract, but not closed); median and average sale prices; number of active listings (inventory), etc.

Those data are available locally, regionally, and nationally.

Further complicating matters: different "scorekeepers" use different formulas.

Case-Shiller, perhaps the best known index, uses a methodology called "matched pairs" to track monthly price changes in the 20 largest metropolitan areas.

By contrast, the National Association of Realtors and various government agencies track more markets nationally, but typically focus on less expensive homes financed with smaller, "conforming" loans (under $417k in most markets).

Some of the foregoing seasonally adjust their data, some don't.

Finally, the housing market is really two markets: existing and new construction (the former is about 10x larger).

New construction has its own tracking bodies and vocabulary, including "permits issued," "housing starts," etc.

No wonder getting an accurate picture of the housing market is like the blind men and the elephant: each one's take . . . depends on their perspective.

Focus: "Micro," Raw Numbers

So, how do you cut through all that complexity?

By getting back to basics -- specifically, by focusing on raw (vs. seasonally adjusted) data, at the local level.

It doesn't get any "rawer" or more local than showing statistics.

A "showing" is nothing more than a prospective Buyer -- accompanied by their Realtor -- viewing a home that's for sale.

In my experience, only about 10% of first showings ultimately lead to a closed sale. However, if you're home isn't getting shown . . . your chances of selling are effectively 0% (my clients all know my line about "if your parents don't have children, you won't either").

In early August, showings for my office, Edina Realty City Lakes, hit a peak for the year at 332. By contrast, the week before Thanksgiving, that number was 94 -- a drop of more than 2/3 (Thanksgiving week, it was even lower, at 60 showings).

Parsing the Numbers

What's the likely explanation?

Early August was when serious Buyers "had to get a move on" to learn the market and close before Nov. 30 -- at the time, the deadline for using the $8,000 tax credit.

When the tax credit was extended and expanded a few weeks ago, traffic fell off even more than normally happens in late Fall.

In truth, the drop-off isn't quite as bad as it looks.

The reason is that Buyers out looking now are typically more serious, whether because of job transfers, expiring leases, etc.

Call it "quality over quantity."

Closings Up, Showings Down

Typical Late August

My office, Edina Realty City Lakes, tracks weekly statistics by several categories: new listings, showings, pending sales, closings, etc.

From a peak of almost 300 showings earlier this month, weekly showings are down about 50%. Meanwhile, closings -- which reflect activity 6-8 weeks earlier -- are WAY up.

Typical late August . . .

P.S.: to Realtors, the market sometimes feels like one big pipeline, with new prospects at the beginning, and closed sales at the end.

"Like at First Sight"

How Many Showings?

Determing the right number of showings before making a purchase decision is a bit like asking, "how many dates before you get engaged?"

In both cases, the right answer is: 'until you know it's the right one' (house or person).

Some lucky Buyers know from the first instant they walk through the door (yes, there's "housing love at first sight"); others are more deliberative, and need several showings to be sure that they're making the right decision.

However, most Buyers will typically view a home 2-3 times before making an offer -- after having toured, in person (vs. online) 10-15 homes previously.

"4th Time Isn't the Charm"

From experience, the first showing is usually about "emotionally connecting" with the home; subsequent showings are about making sure that the home's size, floor plan, etc. are a good fit, and that the home's condition is as billed (the inspection focuses exclusively on that question).

Of course, every rule has exceptions.

For example, Buyers contemplating major changes, or tackling a home that needs serious renovation, may take longer to "get their arms around" things like feasibility, budgets, upside potential, etc.

However, absent those factors, lingering ambivalence after multiple showings can be a sign to move on.

In house hunting -- unlike life generally -- the fourth showing usually isn't the charm.