In the real estate industry, agents and lenders speak often of average days on the market, closed to list price ratios and other metrics.
There’s something we need to really consider to gain perspective on the overall market conditions, though. That concept is survivorship bias.
This form of bias results when one mistakes one part of the data for all the data. In the case of housing, if I share the following stats with you:
The closed to original list price ratio for the last 30 days for Single Family Homes in El Paso County is 98.56%.
I am sharing that homes are selling for 2.52% below their list price on average in the last 30 days.
Contrast that with this same time last year, in which homes were selling for a median of 98.51%
One might infer from this that the market hasn’t shifted much.
However, the homes that did not sell in the last 30 days increased by a factor of over 70%.
Looking only at one set of the data – the homes that sold – would blind an observer to the fact that quite a few more homes have fallen out of the market in these last 30 days.
Here’s a bit more technical analysis via my GrokTheMarket blog.