Market Trends: Pricing and Inventory

There are three basic measures that you should look at when considering pricing in an area:

• Price per square foot
• Percent of sale-to-list price
• Inventory levels (# of homes for sale and sold)

Redfin's trends are based on MLS data along with data from other sources, such as public records, so that we can provide you the most accurate and up-to-date information available.

When using this pricing information, it's important to remember these points:

• Just like the stock market, past performance of an area does not guarantee future performance.
• The data is derived from an aggregation of many homes and each individual home sale may not have the same behavior as the all the homes put together.
• The aggregation of homes may include homes that are not comparable to the specific home that you are interested in so you should not use only this data for Comparative Market Analysis (CMA).
• The data in some areas is more volatile because there are fewer homes for sale.

If you're unsure what the numbers are telling you, don't worry. Just contact one of our real estate agents to get advice and guidance on market conditions.

This is the middle of the pricing range for that area. To determine whether a particular house is above or below this point, you need to consider what features above the average home it has. Does it have fewer bedrooms? A bigger lot? An extra garage space or no garage at all? Additional features will put the market value of that house above this number; fewer features will put it below.

When evaluating the pricing range for a particular area, you should look carefully at two numbers median list $/sq.ft. and median sold $/sq.ft. The median list price is what sellers are pricing the inventory that is still on the market. The median sold $/sq.ft. is the actual value for homes that are selling. The median list number represents inventory that isn't selling and is probably overpriced. The sold number is better representation of what someone is willing to pay in that area.

Make sure you're looking at only the particular property type you are interested in (house or condo) as they will have different ranges and trends than they do combined.

It is important to remember that these two medians do not represent the same houses; do not interpret the lines as a ratio of list to sale price. Don't worry though; we've got that calculated for you.

This number shows how much buyers in an area are paying for homes compared to list price. You can use this ratio of sale price to list price to figure out if a neighborhood is hot or cold.

If this number is above 100%, most buyers are paying more than the asking price for a house. Sales are likely multiple offer situations where buyers will be bidding against others making offers are the same time. We currently see this occurring most often on bank-owned properties that are priced below market value to generate lots of interest and thus sell the house more quickly.

If the percent sale-to-list is below 100%, homes are selling at a discount of what most sellers are asking in that area. That doesn't mean every seller will take an offer at that price, but you've certainly got a better chance at near that price than in other areas.

Here are some considerations to think about when making an offer at a discount of the list price:

• Look at the number of sales that this ratio is based on. If there are only a few sales (say, less than 15) in an area, a single sale can swing the ratio wildly. If there are many sales, then the significance of this ratio is much stronger.
• Can the seller afford to take the price you're offering? Look at the price they paid for that particular home in the price history on the details page. If you are offering less than or near what they originally paid, it will make it difficult for the seller to accept that offer. It may even put them in a short sale situation where they need their bank's approval to move forward.
• Does the house need a lot of work? If this house needs more work than a typical house in that area, that's potentially good reason to submit a discounted offer as long as the house is priced close to the median $/sq.ft. for that area. If it's already priced below the median of the market, it's less likely they'll take an additional discount on top as they've already taken its condition into consideration.
• Can you justify the offer price with similar sold data? Doing a comparative market analysis (CMA) where you back-up your offer price with similar, recent sales of nearby homes will bolster the justification of the price you want to offer and make the case to the seller that his or her home is overpriced for the market.

This number is calculated as a 90-day simple moving average to show which way sales are trending in the area.

If the number of homes for sale is increasing and the number of homes sold is decreasing, then more homes are sitting on the market for longer and prices in the area go down. Likewise if the inventory is selling at a higher rate than new homes are coming on the market, prices will usually go up.

Inventory levels are also seasonal, so you'll see more homes for sale during the spring and summer than you will in the winter. Homes that are not sold in the fall are often taken off the market until the spring buying season heats back up. You can look at the property history and cumulative days on market (CDOM) on the listing details page for a particular listing to know if the home was on the market before and has come back. The longer a home sits on the market the seller will feel more pressure to lower the asking price.

Learn more about Redfin's market stats and trends:

• Price Reductions
• Methodology
• Viewing Redfin's Stats and Trend Pages
• Frequently Asked Questions (FAQ)