“Listing Success Rate” is defined as, “the percentage of listings that closed with a sale rather than expiring or being canceled”. It compares the number of listings sold this month with the number of listings that were sold, expired or canceled in the same period.
At this moment in time, the Phoenix real estate market is running at about a 60% listing success rate. In other words, 60% of all listings are sold.
What happens to the other 40%?
In a nutshell, they aren’t sold. The listing either expires, or is cancelled, or in the case of many short sale listings, is foreclosed on (and most likely re-listed at some point later as a lender owned (aka “REO”) property).
So is 60% “good”? It depends on your perspective. If you are trying to sell a home, you want to see Listing Success Rate as high as possible. If you are buying a home, a higher rate means (generally speaking) that their is more competition for available listings. More competition for the buyer means less negotiating power, and increased potential for multiple offer situations.
Historically speaking, a 60% listing success rate is quite high. My stats service only tracks this particular metric back to February 2006, and the current Listing Success Rate matches the high of March 2006.
Here is the historical data:
The critical reviewer of real estate statistics would be asking themselves, “why the big increase in Listing Success Rate 2009?” A very reasonable question.
Currently, the Phoenix real estate market is heavily influenced by “distressed properties”. Distressed in this case means lender owned foreclosures and pre-foreclosure (short sale) properties, not distressed as in the pissed off owner has trashed the home and ripped out the fixtures, flooring and appliances (though believe me, that happens). Distressed listings currently make up almost half of the available listings and in most parts of the Phoenix metro area compose a significant proportion of sales (see the Distressed Sales chart posted last week for the gory details).
As anyone that has tried to buy a bank owned home will tell you, they are moving very quickly. It is the norm, not the exception, to see new bank owned listings get multiple offers within days of coming on the market.
Here is the Listing Success Rate for each major market segment (as of Saturday May 23):
- Lender Owned Properties ”“ 89.8%
- Pre-foreclosures (short sales) ”“ 36.6%
- “Normal” (not lender owned or short sales) ”“ 40.6%
So there is your reason for the sharp increase in overall Listing Success Rate. Almost 90% of lender owned property listings end in a sale. Only 40% of “normal” listings end in a sale.
This market segment breakdown is why I sometimes struggle with the reports and indexes often quoted in the mainstream media and elsewhere. When you break down these overall market aggregated numbers into individual components, they often tell a very different story. It would be easy for a seller in a “normal” situation to see the graph posted above and begin a Happy Dance. The astute normal seller (who hopefully has an astute agent working for them) would note that their market segment isn’t performing quite so well when is comes to Listing Success Rate. Factor in other considerations, such as location, price range, condition, the number of surrounding distressed listings, etc. and you can find yourself in a very different situation than the broad-based metrics may indicate.
It’s a great trend and clearly is better than if the line were going in the other direction, but as always look at all real estate statistics with a critical eye and consider all the factors that compose the metric(s) you are investigating.
Tables and charts from The Cromford Report using data from public records and data licensed from the Arizona Multiple Listing Service (ARMLS). Cromford Associates LLC, ARMLS and yours truly, Jay Thompson, expressly disclaim and make no representations or warranties of any kind ”“ express, implied or statutory ”“ as to the accuracy of the data, nor its merchantability or fitness for any particular purpose.
In other less legal-like words, if you use this data to make personal, business or investment decisions and something blows up, it’s not our fault and you can’t sue us.