Days-on-the-Market (DOM) is an important measurement in property. It measures how long a home is listed for sale before someone buys it.
According to SRX property, the average DOM for HDB is 82 days. This meansit takes almost three months, on average, to sell an HDB home.
It’s much worse for condos. The DOM for private is 137 days, or over four months to sell a condo unit.
Typically, the average DOM is inversely correlated to market conditions, meaning it’s long (or high) when demand is low and the market is slow.
In contrast, the average DOM is short (or low) when the market is hot and homes are selling like hotcakes.
As such, it’s easy to blame today’s unusually long DOM of 82 and 137 days on the Cooling Measures.
In my view, though, this is too easy of an answer. Yes, Cooling Measures have reduced demand but a DOM of three to four months? This is an awfully long time for a home to sit unsold.
Furthermore, how do the Cooling Measures explain those homes that sell in less than 14 days? For example, recently Eileen Lau of DWG, Eric Ee of ERA, and Ong Yu Rong of PropNex sold homes in less than 14 days.
I would submit that today’s long DOM is partially a reflection of the Cooling Measures but mostly the result of market mispricing.
Over the last year, the average purchase price is within 3.6% of the X-Value for all home types, including landed homes. This means that most sellers cannot beat the computer generated X-Value by that much.
Yet they try.
If you look at listing prices for most units, they can deviate significantly from the corresponding X-Value.
Recently, I reviewed one condominium that was priced at more than $100,000 above X-Value. The owner felt that the view warranted that premium in price. The home sat on the market for 45 days. It received 20 visits and no offers. Finally, its agent invited SRX Valuations to price the property. The valuer priced the home $10,000 above X-Value, to account for some qualitative factors, and the home sold within two weeks.
The point is that you can try to sell a home above market value but in order to be successful, you must find a buyer who doesn’t understand current market pricing.
These uninformed buyers are becoming rarer and rarer so you might as well avoid a long DOM by pricing the property at the Right Price when you first list it.
Pricing a home that deviates significantly from its X-Value creates significant risk for the seller.
The longer a home sits on the market, the more “stale” it becomes. Buyers are smart. They see a long DOM and a large mismatch between asking price and X-Value and their antennas for danger go up. Many won’t bother viewing it. Others will view it but not make an offer. Some will try to negotiate the price down. No informed buyer will buy it at an inflated price.
What does the seller get out of this scenario? A reputation for asking too much, and the agony and inconvenience of people traipsing through his home with no offer to show for it.
My advice to sellers is set the Right Price. Ask your agent to hire a valuer. He or she can get one for peanuts. If the valuation meets your expectations, then list it at the valuation plus Goodwill. If you think the value of your home is too low, sit it out until the market catches up to your expectations.
TODAY Newspaper