One of the metrics used to analyse available supply and demand in property market is Days on Market, or DOM. DOM is an indicator that measures the number of days the property has been listed “for sale”. If a seller lists a property and it stays on the market for 60 days before it is sold, we say DOM for that property is 60 days.
The days on market for single property is easy to calculate.
How does days on market for a suburb is calculated?
If we take all the properties for sale in particular area (for example suburb) and average this number we will get days on market for the whole area. If we look at a fictional suburb of Analytica, and this suburb has 3 properties sold. Property A was n the market for 30 days, property B was on the market for 60 days, Property C was on the market for 45 days. If we sum all these days and divide them by number of properties we get the DOM for the suburb.
In this instance the days on market is (30+45+60)/3=45 days.
Why is days on Market (DOM) important?
Days on market is an indicator for the demand on properties in an area. It is expected that, the higher the demand the lower DOM is. This means that properties are snapped up by buyers quickly. The longer properties linger in the market the less the demand is, because less buyers want to buy.
Why is this important? Because due to laws of economics, the higher the demand is the more chances are the prices will grow. When demand is high, buyers bid for properties, offer higher prices and tend to push prices up. As buyers become more and more eager to buy the property, they offer more and more for their dream home.
AS property prices increase, after a particular point the demand starts to decrease. This is because less and less people are able to afford properties in the high demand area as prices move up. Eventually the market demand and supply meet at equilibrium and prices stabilise.
Where can I get days on market data?
One of ways to look at property market is to visit real estate websites. This handy tool gives an overview of demand for properties in particular areas. Another way to look at days on market is to flag listing and see how long it takes before they are removed. Finally, there is this website that could be handy.