What Are Days on Market?
Days on market (DOM) represents the total number of days a residential property has been actively listed for sale on a multiple listing service (MLS) or similar public platform, starting from the date it was first listed until a purchase agreement is signed. This metric is a crucial economic indicator within the broader housing market category, offering insights into the liquidity and demand for properties. A lower DOM typically suggests a faster-moving market, where homes are being sold quickly, while a higher DOM indicates a slower market. Understanding days on market is vital for both buyers and sellers as it can influence negotiation strategies and expectations regarding the sales process.
History and Origin
The concept of tracking how long a property remains available for sale evolved with the formalization of real estate listings and organized efforts to share property information among agents. Before the widespread adoption of Multiple Listing Services (MLS) in the 20th century, the "time on market" was less formally tracked. As MLS systems became standard, providing a centralized database for properties, recording the initial listing date and subsequent status changes became systematic. This allowed for precise calculation of days on market.
Historically, longer days on market for a property could carry a "stigma," signaling to potential buyers that there might be underlying issues or that the listing price was too high, leading to a perception that other buyers had passed over the property. Research has explored the impact of this information and how changes in MLS policies, such as those in Massachusetts in 2006 prohibiting sellers from resetting DOM through relisting, can affect selling price and seller behavior. Such policy shifts aimed to provide more transparent information to buyers about a property's true market exposure.8
Key Takeaways
- Days on market (DOM) measures the duration a property is active on the market, from listing to contract.
- It serves as a key indicator of market liquidity and buyer demand within the real estate sector.
- A lower DOM generally signifies a strong seller's market, while a higher DOM suggests a buyer's market.
- DOM can influence pricing strategies, negotiation leverage, and buyer behavior.
- The metric is regularly reported by real estate associations and statistical bodies, offering insights into regional and national housing trends.
Interpreting the Days on Market
Interpreting the days on market requires context, as what constitutes a "good" or "bad" DOM can vary significantly based on location, property type, and overall housing market conditions. For instance, a property in a highly competitive urban area might have a DOM of only a few days, whereas a unique or high-end property in a more rural setting could reasonably sit on the market for several months.
Generally, a shorter days on market suggests strong buyer interest and indicates that the property value is perceived as aligned with its asking price, or even undervalued. Conversely, a longer DOM might imply that the initial listing price was too high, the property requires significant repairs, or there's insufficient buyer demand. Real estate professionals use DOM as a barometer to advise sellers on pricing adjustments and to inform buyers about the pace of the local market and potential negotiation room. Factors such as mortgage rates and available inventory also play a significant role in influencing DOM.
Hypothetical Example
Consider a hypothetical scenario involving two similar homes listed for sale in the same neighborhood:
Home A:
- Initial List Date: January 1, 2025
- Accepted Offer Date: January 15, 2025
- Days on Market: 14 days
Home B:
- Initial List Date: February 1, 2025
- Accepted Offer Date: May 1, 2025
- Days on Market: 90 days
In this example, Home A had a significantly lower days on market than Home B. This could suggest several things: Home A was perhaps priced competitively, was in excellent condition, or was located in a particularly desirable pocket of the neighborhood with high [supply and demand]. Home B, with a DOM of 90 days, might indicate that its initial listing price was too ambitious, or it had features that appealed to a smaller segment of the market. Sellers of Home B might have needed to adjust their expectations or the price to attract an offer.
Practical Applications
Days on market is a widely used metric in various aspects of the real estate and financial industries:
- Valuation and Pricing: Real estate agents and appraisers analyze DOM trends for comparable properties to help determine optimal listing price strategies. A neighborhood with consistently low DOM for similar homes may support a higher initial asking price.
- Market Analysis: Economists and housing market analysts use aggregate DOM data to gauge the health and direction of local, regional, and national housing markets. For instance, the National Association of REALTORS® (NAR) regularly publishes existing-home sales data, which includes median sales prices and often implicitly reflects market speed through DOM trends.,7,6
5* Investment Decisions: Real estate investors consider DOM when evaluating potential acquisitions. Properties with high DOM might represent opportunities for negotiation or indicate potential challenges in reselling the property quickly. - Policy Making: Government bodies like the U.S. Census Bureau collect and provide extensive housing data that, while not directly DOM, contribute to understanding the broader market dynamics that influence DOM.,4 3This data can inform policies related to housing affordability and development. The Federal Reserve also monitors housing trends, including those that impact time on market, to inform its monetary policy decisions.
2
Limitations and Criticisms
While days on market is a valuable metric, it has limitations that warrant careful consideration:
- Manipulation: Historically, one criticism of DOM has been the potential for manipulation. Sellers or their agents might delist a property and then relist it shortly after to "reset" the days on market count, making it appear as a new listing with less market exposure. While some MLS systems have implemented rules to prevent this, it can still obscure a property's true time on market. This practice can mislead buyer behavior, as buyers might infer property quality from DOM.
1* Seasonal Variations: DOM can be influenced by seasonal factors. The housing market typically sees increased activity in spring and summer, potentially leading to lower DOM, while winter months might see higher DOM due to slower sales activity. - Market Nuances: Aggregate DOM figures can mask specific market nuances. For example, a high overall DOM for a city might be skewed by a few luxury properties that naturally take longer to sell, while the majority of standard homes are selling quickly.
- Property-Specific Factors: DOM does not account for individual property attributes such as unique architectural styles, extensive renovations, or unusual locations, which can all legitimately impact how long a home sits on the market regardless of broader conditions.
- Data Lag: Like many economic indicators, DOM data reflects past activity. While useful for trend analysis, it may not immediately capture very recent shifts in market conditions.
Days on Market vs. Time on Market
The terms "Days on Market" (DOM) and "Time on Market" (TOM) are often used interchangeably, but there can be subtle distinctions depending on the context or the specific rules of a Multiple Listing Service (MLS).
| Feature | Days on Market (DOM) | Time on Market (TOM) |
|---|---|---|
| Definition | The number of days a property has been actively listed on an MLS since its most recent listing. | The total period a property has been available for sale, including any periods it was withdrawn and then relisted. |
| Calculation | Counts only the days from the most recent listing start date to the contract date. | May include cumulative days across multiple listings if a property was delisted and relisted, especially if MLS rules track this. |
| Purpose | Primarily used as a real-time indicator of current market exposure and demand. | Provides a broader view of how long a property has genuinely been available, regardless of listing status changes. |
| Impact on Buyers | Shorter DOM may suggest a desirable property or competitive market. | A high time on market, even with a low DOM (due to relisting), might signal deeper issues to informed buyers. |
While DOM typically refers to the current, continuous listing period, TOM can encompass the entire sales journey, providing a more comprehensive look at how long a property has truly been for sale. For most practical purposes in current real estate transactions, "Days on Market" is the more commonly cited and directly impacts seller behavior and negotiation.
FAQs
What is a good Days on Market (DOM)?
A "good" DOM varies by location and market conditions. In a strong seller's market, properties might sell in under 30 days. In a balanced market, 30-90 days is common. A DOM exceeding 90-120 days often suggests a slower market or that the listing price may need adjustment.
How does Days on Market affect a property's value?
A longer days on market can negatively impact a property's perceived property value because potential buyers may assume there are hidden issues or that the asking price is too high. This can lead to lower offers or a need for price reductions to attract buyers. Conversely, a short DOM can indicate a highly desirable property, often leading to multiple offers and a selling price at or above the asking price.
Can Days on Market be reset?
In some older or less regulated MLS systems, delisting a property and then relisting it could "reset" the days on market. However, many modern MLS systems have rules to prevent this, tracking cumulative time on market to provide a more accurate picture of a property's true market exposure.
Is Days on Market the same as closing time?
No. Days on market measures the time from when a property is listed to when a purchase agreement is signed (i.e., it goes under contract). Closing costs and the closing process occur after the property is under contract, typically taking an additional 30-60 days.
Why is Days on Market important for buyers?
For buyers, days on market provides leverage and insight. A high DOM might indicate that a seller is more motivated to negotiate on price or terms. A low DOM suggests a competitive environment where quick decisions and strong offers may be necessary to secure a property. Understanding the local DOM helps buyers gauge the urgency and competition in the housing market.