What Does "Days on Market (DOM)" Mean in Real Estate?
- Days on Market (DOM) is a statistic to measure how long a property is listed before it’s either sold or taken off the market.
- You can compare neighbourhoods and properties with the DOM statistic.
- You can predict real estate prices with regional DOM trends.
- Regions with low DOM favour sellers. High DOM regions favour buyers.
Days on Market or "DOM" is a crucial statistic used to understand real estate activity in a particular area. DOM measures the number of days between a property's initial listing and the date it either sold or was taken off the market. A decreasing DOM means a market becomes more competitive, while the opposite is true with an increasing DOM. It is used to compare locations and also to predict trends.
What Does DOM Mean?
DOM is a statistic used to measure how many days a property takes to sell or be taken off the market. It can be applied to a singular house or averaged to a region.
When comparing two neighbourhoods, a higher DOM tells you houses take longer on average to sell in that area. The houses could take longer to sell because of undesirable features such as high prices, being too far from amenities, an unfavourable school district, or a cold market.
For example, look at the chart below with MLS Data. Toronto has an average DOM of 16 days, while Edmonton real estate takes 42 days on average to sell. Although Toronto is more expensive, many desirable features make it a hotter market than Edmonton.
Lower DOM neighbourhoods tells you houses are selling quickly and the market is competitive. Buyers are rushing to purchase a home and are likely making offers with fewer contingencies.
You can also use DOM to compare a property with its neighbourhood. For example, if a property takes longer to sell than the neighbourhood average, it could signal reevaluating the price using comparative market analysis.
It is worth noting that the DOM resets for a specific property each time it's re-listed. Real estate agents may re-list a property after it has been on the market for a long time. This is because the high DOM could discourage buyers. The cumulative days on market (CDOM) statistic solves this issue and is explained later.
How to Analyze DOM to Predict Future Real Estate Trends
Along with comparing different neighbourhoods and properties, DOM can analyze trends and make predictions over time. For example, if the average DOM an area increases yearly, you can expect listing prices to drop compared to the average regional market. To incentivize demand, sellers will offer competitive prices to sell faster.
It is worth mentioning that real estate prices typically increase over time so an increasing DOM will not drop real estate prices alone. Generally, a neighbourhood with an increasing DOM will see slower price growth than the surrounding region.
The opposite is true for neighbourhoods with a decreasing DOM. These markets are more competitive, and sellers can demand higher prices.
These neighbourhoods will increase in value faster than the surrounding region.
DOM can also reveal information about seasonal trends and the best month to sell your property. It would be best to sell when the DOM is low and buy when the DOM is high. For example, If your community's DOM is lowest in the spring, you should sell your home then to raise the prospect of a bidding war.
How Does DOM Affect Buyers?
Buyers need to look at DOM to understand how competitive a neighbourhood is. Neighbourhoods with a low and decreasing DOM are competitive, so the buyer will need to make a favourable offer. Buyers should also ensure to quickly receive home insurance quotes to close on the property fast. An experienced real estate agent would advise the buyer to increase the offer price or reduce conditions in the purchase agreement.
Additionally, buyers can compare the DOM of a particular listing with the neighbourhood average when making an offer. If the listing's DOM far exceeds the neighbourhood average, then you can assume the sellers don't have many offers. The buyer can leverage this information to negotiate a better deal.
How Does DOM Affect Sellers?
DOM also affects the pricing strategy for real estate sellers. If a neighbourhood's average DOM is consistently decreasing, it could be worthwhile for the seller to delay listing the property. If the trend continues, the property could be listed in a more competitive market with a higher chance of a bidding war.
However, if the neighbourhood DOM is increasing, then it's better to sell now. An increasing DOM makes it difficult for sellers to show their homes. This is because homeowners have to compete with other sellers to find buyers. Sellers will need to pay attention to every aspect of marketing their home, from staging it properly to advertising in multiple online platforms or publications.
How is DOM Different From CDOM?
Days on Market (DOM) is different from Cumulative Days on Market (CDOM) because DOM is reset each time a property is re-listed. As a result, real estate agents can manipulate the DOM statistic to make an unsold property appear more attractive. This is why it's essential to cross-reference with CDOM, which isn't reset with each re-listing.
For example, Imagine a property initially listed in January but doesn't receive any offers so is removed from the market in April. If this property were re-listed in May and sold in June, then the statistics would appear as:
- DOM: 2 Months (May - June)
- CDOM: 6 Months (January - April, May - June)
DOM can typically be found on any listing website, but CDOM is usually only available through MLS. Buyers can see it through talking with their real estate agent. Although no statistic is better than each other, they help paint an accurate representation of the listing.
FAQ
How do you calculate DOM and CDOM?
DOMDOM is calculated by subtracting the day a house was first listed from the date it closed. If it closed today, you would take today's date and subtract the day that it was first listed.
It can be written as follows: Date House Sold or Taken Off Market - Date House First Listed = DOM days.
CDOMCDOM is not reset each time a property is relisted; it is a cumulative statistic. If a property were taken off the market and relisted, CDOM would continue off the previous DOM. Each real estate board calculates CDOM differently. Typically, a property must be relisted in a 30-90 day period for CDOM to count it.
Do luxury homes usually have a higher DOM?
Yes, the high prices reduce the number of qualified buyers, so it takes longer for a sale to happen. However, many luxury sellers use a pocket listing which keeps the DOM statistic private.
What are the benefits of knowing DOM stats for investment properties?
DOM is beneficial for investment properties because it helps agents determine negotiation leverage. Sellers have more power in deals with a lower expected DOM because there will be more buyer competition.
Do safer neighbourhoods always have a lower DOM?
No, they can vary for different areas. It all depends on the demand of the location and what is available to buy in that area.
Why is DOM higher for a specific property
A few factors can cause a higher DOM. Initially, the listing price could be too high and preventing offers. It could also be that the house isn't advertised well. Finally, unique and niche properties have a smaller pool of interested buyers, so they tend to be for sale longer.