Days on Market—the clock is ticking

As you probably know, in real estate, Days on Market is the number of days a property is listed for sale before it’s sold or taken off the market. Specifically, the range starts with the day a property’s status changes to “active” on an MLS and ends when the property’s status changes to “under contract” (sometimes called “pending”).

Of course, the current phenomenon of an extremely brief median Days on Market is due to the inventory shortage. The shortage is caused by the number of homeowners unwilling to move because they’re locked in at sub-5% and sub-4% mortgage rates. Even with mortgage rates showing signs of lowering from their 2023 peak, many homeowners would be looking at a monthly mortgage payment that could be double their current payment if they buy a home of comparable value.

This is, undeniably, a sellers’ market. A typical seller in this market is likely to field multiple offers for their home in a very brief time span. One of the advantages of knowing this ahead of time is that it gives sellers the confidence to set their home price higher than they might in a buyers’ market. Sellers should always study the comps in their neighborhood, of course. If they’ve priced it too high, they can always drop the price after two weeks without any offers—but if they price it too low, they may be leaving money on the table and not know it unless a bidding war makes it apparent.

Buyers in this market need to put on their game face and get all their ducks in a row. They need to know exactly what they’re looking for, exactly how much they can afford, and be prepared to take decisive action quickly. This is where you as their real estate agent come in. Particularly for first-time homebuyers, research and preparation are key. Walk them through a dry run of the entire process so there are no surprises. Review their must-haves and dealbreakers to help them refine their search. Encourage them to get prequalified or preapproved. Make it clear that—while time is of the essence in this market—this is likely the biggest purchase of their lives up to this point, and they should be sure they’re making the right decision before they invest their hard-earned money in a property.

While this condensed time frame can be stressful, some buyers may enjoy a speedier process that gets them across the finish line sooner.

The key to a healthier span for Days on Market depends on an increase in inventory—enough supply to meet the demand. The three key factors to that increase are:

1) New home construction — According to the National Association of Home Builders (NAHB), single-family housing starts are on course to increase 4.7% nationwide this year and another 4.2% in 2025, reaching a pace of 1.3 million units.^Footnote2

2) Lower mortgage rates — Lower rates will encourage homeowners to sell their current home and take advantage of the sharp increase in home prices since the pandemic. Though the Fed has promised to reduce interest rates at some point this year,^Footnote3 rates have remained mostly stagnant for the first half of 2024. If rates do drop later in the year, and new home construction completions continue to rise, Days on Market will rise again, but gradually.

3) A change in the agent commission structure — As part of ongoing litigation, the standard 6% commission for real estate agents may cease to be the norm.^Footnote4 Homebuyers and sellers have always been able to negotiate commissions with agents to get the best deal, but this was not common practice. Now it likely will be. Some economists predict this could reduce agent commissions by as much as 30%.^Footnote4 Lower commissions can translate into savings for sellers that may incentivize some homeowners to put their homes up for sale.

People will always need to buy homes and people will always need to sell them. That will never change. This moment, while peculiar in some ways, has come before and will come again. The market will never be ideal for everyone. There will always be pros and cons. Advantages and disadvantages. The important thing is to prepare and inform clients about the context and the variables so they can best take advantage of current conditions.