Sell Price/List Price Ratio, Great Market Indicator
One of the things that drives me nuts is reading news articles which follow the following formula:
Headline (this is a choose your own adventure): Housing market [stabilizing/worsening/improving]; May numbers [steady/down/up] compared to numbers from previous [month/year]
It is almost impossible to glean anything of importance from these idiotic articles and I think we should make a rule that the article cannot be printed unless an accompanying graph is also printed in order to give people some sense of market direction.
In addition, I think that the econo-journalists spend a little too much time on prices. Volume is another of the important indicators, but there are others that tend to go ignored.
The Sell Price/List Price Ratio is a great indicator of what is happening in the market. It tells you whether or not Buyers and Sellers are in agreement over what prices should be.
The chart below shows the Sell Price/List price ratio for a sub-market in Southern California. It gives a great indication of whether the market is functioning well or not. Note that following the credit disruptions of 2007 there were major hits to the SP/LP ratio as Sellers had to make major adjustments to get to where Buyers were at. Because of contract times (and the amount of time it currently takes to get a loan funded) the trend usually lags by about 60 days. The early June numbers show market improvement, which would related back to offers written in the March-April time period. It’s customary to get a little bounce in the spring, so we would need to watch the June number as more data comes in and also see if the trend holds and we get closer to a ratio of 1:1 for the Sell Price/List Price ratio.
Related posts:
- List Price/Sale Price Ratio – Corona, CA Below is another chart related to the health of the...
- Market Indicator: Days on Market I’m going to continue to push for our financial media...
- Non-price Indicators I’ve posted before on the importance of non-price indicators in...
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