Time on market

What Is Time on Market?

Time on market refers to the duration a property or asset is actively listed for sale until a contract is signed or the asset is sold. It is a critical metric within the field of Real Estate Metrics and broadly applicable in Financial Analysis for various asset classes. This period begins when an asset, such as a home, stock, or business, is publicly offered for sale and concludes when a legally binding agreement to purchase is executed. Analyzing time on market provides insights into Supply and Demand dynamics, market liquidity, and overall market conditions. A shorter time on market often indicates a strong seller's market, while a longer duration can suggest a buyer's market or challenges with the asset's Listing Price or condition.

History and Origin

While the concept of "time on market" has always inherently existed wherever goods or assets were traded, its formal tracking and significance escalated with the professionalization of Real Estate brokerage and the advent of centralized listing services. In the United States, the development of Multiple Listing Services (MLS) in the early to mid-20th century allowed for more systematic data collection on properties for sale. This provided a structured way to measure how long properties remained active before being sold. Economic data providers, such as the Federal Reserve Economic Data (FRED), now track and publish data on the median number of days properties spend on the market, illustrating its evolution as a key economic indicator for housing across the United States.⁴ The ability to aggregate and analyze this data has transformed time on market from a simple observation into a vital metric for market participants.

Key Takeaways

Time on market measures the period an asset is actively listed for sale until a sales agreement is reached.
It serves as a key indicator of market strength, Liquidity, and the balance between buyers and sellers.
A shorter time on market generally suggests high demand or competitive market conditions.
Conversely, an extended time on market can signal weak demand, overpricing, or other issues with the asset.
The metric is widely used in Market Analysis for real estate, businesses, and other illiquid assets.

Formula and Calculation

The calculation for time on market is straightforward:

\text{Time on Market} = \text{Date of Signed Contract} - \text{Date of Initial Listing}

Variables Defined:

Date of Signed Contract: The date on which a legally binding purchase agreement for the asset is executed.
Date of Initial Listing: The date when the asset was first publicly listed for sale.

This calculation typically yields a result in days, but it can also be expressed in weeks or months, depending on the context and the type of asset being analyzed. For instance, in Property Valuation, this figure is almost universally expressed in days.

Interpreting the Time on Market

Interpreting the time on market requires context, as an "ideal" duration varies significantly based on asset type, geographic location, and prevailing Market Cycles. In Real estate, a short time on market (e.g., under 30 days) often indicates a strong seller's market, where properties are in high demand and buyers may face intense competition. A longer duration (e.g., over 90 days) might suggest a buyer's market, where there is an abundance of supply relative to demand, or that the asset may be overpriced or have other perceived drawbacks.

For other Financial Assets, especially illiquid ones like private businesses, a longer time on market is often expected due to the complexity of due diligence, financing, and negotiation processes. The Federal Housing Finance Agency (FHFA) publishes House Price Index data, which, while not directly time on market, reflects the underlying market conditions that influence how quickly properties sell.³ Understanding regional and asset-specific averages is crucial for accurate interpretation of the time on market.

Hypothetical Example

Consider a hypothetical scenario involving a residential property. On March 1, 2025, a homeowner lists their house for sale. The initial Listing Price is set at $450,000. For the first two weeks, there are several showings but no offers. The homeowner and their agent decide to slightly reduce the price, which generates renewed interest. On April 15, 2025, a buyer submits an offer, and after some negotiation, a purchase contract is signed on April 20, 2025.

To calculate the time on market:

Date of Initial Listing: March 1, 2025
Date of Signed Contract: April 20, 2025

Counting the days between these two dates:
March has 31 days. (March 1 to March 31 = 31 days)
Days in March (from listing date): 31 - 1 + 1 = 31 days.
Days in April (until contract date): 20 days.
Total Time on Market = 31 days (March) + 20 days (April) = 51 days.

In this example, the property was on the market for 51 days. This figure would then be compared against local market averages and other Economic Indicators to assess its performance.

Practical Applications

Time on market is a widely used metric across various financial and economic contexts:

Real Estate Investing and Sales: Real estate agents and sellers use time on market data to gauge buyer interest, adjust pricing strategies, and manage expectations. Buyers may use it to identify motivated sellers or assess the competitiveness of an offer. The National Association of REALTORS® (NAR) provides extensive research and statistics on housing markets, including metrics that relate to how quickly homes sell, offering valuable context for market participants.
²* Business Valuation: For private businesses, time on market indicates the ease or difficulty of finding a buyer. A prolonged period could suggest issues with the business's profitability, industry trends, or asking price.
Auction Markets: While typically very short, the "time on market" in an auction setting refers to the period between the initial announcement of the auction and the closing bid, reflecting immediate demand.
Lending and Underwriting: Lenders may consider average time on market in a given area when assessing the risk associated with a mortgage. Faster sales can imply a more stable or appreciating asset, reducing default risk.
Economic Analysis: Economists and policymakers monitor aggregate time on market data as a leading indicator of economic health and housing market sentiment. Shifts in average time on market can signal changes in consumer confidence, Interest Rates, or overall economic growth.

Limitations and Criticisms

While useful, time on market has several limitations and faces criticism regarding its completeness as a metric:

Varying Definitions: The exact starting and ending points for calculating time on market can vary. Some sources may count from the first day a property is publicly listed, while others might restart the clock if a property is delisted and relisted, potentially artificially shortening the perceived time on market.
Data Lag: Real estate data, especially national averages, often has a reporting lag, meaning the reported time on market may not reflect the most current market conditions.
Ignores Negotiation Period: The metric usually only accounts for the period until a contract is signed, not the full duration until Due Diligence is completed and the transaction officially closes.
Market Manipulation: There can be incentives for agents or sellers to manipulate time on market figures by temporarily withdrawing and then relisting a property to make it appear "fresher" on the market.
Impact of Commission Structures: Recent legal settlements in the real estate industry, such as the one involving the National Association of REALTORS® in March 2024, are poised to alter how real estate agents are compensated, potentially influencing how listings are handled and, indirectly, time on market. C¹ritics argue that traditional commission structures may have incentivized agents to prolong or shorten listings in ways that did not always align with the seller's best interest.
Doesn't Capture Buyer Behavior: It doesn't inherently explain why properties are or are not selling quickly, requiring deeper Market Efficiency analysis to understand underlying buyer behavior and property specific challenges.

Time on Market vs. Days on Market

The terms "time on market" and "Days on Market" are often used interchangeably, especially in the context of real estate. Functionally, they refer to the same concept: the number of days a property has been listed for sale. However, "Days on Market" is typically the more precise and commonly used term in real estate databases and reports, providing a straightforward numerical count. "Time on market" can be seen as a broader, more conceptual phrase that encompasses this duration, applicable to a wider range of assets beyond just real estate. While the meaning is generally the same, "Days on Market" is the specific industry standard for reporting this metric in residential and commercial property sales.

FAQs

What is a good time on market for a house?

A "good" time on market for a house is relative and depends on the local Real estate market. In a strong seller's market, properties might sell in under 30 days. In a balanced market, 30-90 days might be typical. A longer duration could indicate a slower market or issues with the specific property.

Does a long time on market affect property value?

Yes, a prolonged time on market can sometimes signal to potential buyers that there might be issues with the property or that the Listing Price is too high. This perception can lead to lower offers or require price reductions to attract buyers, thereby indirectly affecting the final sale value.

How do interest rates influence time on market?

Interest Rates significantly impact affordability for buyers. When interest rates rise, mortgage payments become more expensive, reducing buyer purchasing power and potentially leading to fewer buyers in the market. This can increase the average time on market as properties take longer to sell. Conversely, falling rates can shorten it by stimulating demand.

Is time on market important for all assets?

Time on market is most commonly and critically applied to illiquid assets, such as real estate and private businesses, where the sale process can take considerable time and involves negotiation. For highly liquid Financial Assets like publicly traded stocks, the "time on market" is virtually instantaneous, as they are bought and sold within seconds on active exchanges.

How can a seller reduce their property's time on market?

Sellers can aim to reduce their property's time on market by setting a competitive and realistic Listing Price based on current Market Analysis, ensuring the property is in excellent condition, effective marketing, and being responsive to offers. Price adjustments may be necessary if initial market reception is slow.