[mis] Understanding MLS market data
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August 4, 2006
Question: When does 2 + 2 = 3?Answer: When calculations are done in the MLS.
This article will attempt to dissect the data we present to gain a better understanding of the statistics reported by the MLS we display on the Front Page (Daily Market Watch) and use for all our charts.
Here are some issues that need explanation:
- NEW LISTINGS DOMP:
If new listings are reported as new in the last 30 days, why is DOMP greater than 30? One would think that it should be 30 or less.
ANSWER:
After a listing has expired or is withdrawn and then made active again, the list date is reset to the new date AND the MLS saves the total time on the market (DOMP). Hence, the greater the average DOMP is above 30, the greater number of listings that are not really new. - NEW CONTRACTS DOMP VS. SOLD DOMP:
If the vast majority of NEW CONTRACTS eventually go to close (SOLD), then why is DOMP for NEW CONTRACTS so much greater than DOMP for SOLD? For example, on August 4th there were 321 NEW CONTRACTS written in the last 30 days with an average DOMP of 100 days. Accumulating SOLD transaction over the same time period shows a DOMP average of 83 days.
ANSWER:
I have trouble figuring this one out. I thought maybe "comparison only" postings of new construction (LIST DATE equals CONTRACT DATE equals SOLD date) might be the influence but, using August 4th SOLD data (again, accumulating the last 30 days), new construction DOMP only lowered the total by 4 days. If my assumption that the vast majority of contracts go to close is wrong, then this might explain the difference. I can't get to the data easily to verify this one way or the other. Regardless, looking at DOMP for NEW CONTRACTS is a revealing statistic. - INVENTORY:
If the change in INVENTORY for a specific period of time is defined as
Beginning INVENTORY + NEW LISTINGS - NEW CONTRACTS - EXPIRED - WITHDRAWALS, then why isn't inventory being reduced at a more rapid rate?
ANSWER:
Because some percentage of EXPIREDS and WITHDRAWALS come back on the market as NEW LISTINGS. We would get a much clearer picture of market activity if the MLS retained the original LIST DATE regardless of the number of times a listing EXPIRES or is WITHDRAWN and re-listed. We could probably back into the numbers but it would take some record processing gymnastics. (of note: a listing must be off the market for 180 days before DOMP is reset to zero when re-listed.) - SALE PRICE TO LIST PRICE RATIO:
If sellers are having to reduce their price substantially to receive and ratify a contract, why is the published ratio still hovering in the mid to high 90% range?
ANSWER:
The MLS published ratio (in percent) is calculated from the most recent LIST PRICE (the LIST PRICE when the contract was ratified) as opposed to the ORIGINAL LIST PRICE. The focus on what is reported is on "negotiated price reduction." Wheras I focus on market dynamics.
From a market dynamics standpoint, if the listing was withdrawn and re-listed with a new price, the ORIGINAL LIST PRICE becomes the re-listed LIST PRICE. In my research I have discovered properties being withdrawn and re-listed on every price change. Is this gaming the system? Maybe so; an individual agent's SOLD to PRICE ratio of the sale starts looking pretty good. It becomes much more difficult to get a good read on how prices are dropping from the original ORIGINAL LIST PRICE (sorry for the o O). I tend to believe it is much greater than what we get in the public reports based on our own anecdotal observations.
None of the above is right or wrong (except for the gaming part). It is what it is and probably for valid reasons. It is just not the way I view the market in most cases. Also, the MLS information is only as good as the data we
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