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Supply, Demand, and How Long to Sell:

Some people think of the average days on market (D.O.M.) as an indication of how long it might take to sell their home. D.O.M. begins when an agent enters the new listing into the Multiple Listing Service (M.L.S.), However, the D.O.M. figures in the M.L.S. reflect the dates that the listing agents report the property as being under contract rather than when the property has actually closed escrow and is officially sold. For the record, the median D.O.M. in Brentwood, Santa Monica, and Pacific Palisades for the last 12 months was 33 days.

There are some significant drawbacks to using the D.O.M. First, it depends on when the agents enter the listing as having opened escrow, which may be delayed by one to 15 days. Also, it varies greatly depending on the price range. For example, the median D.O.M. during the past 12 months was 50 percent longer for homes sold above $2.1 million than those below that level. Finally, if a property has expired, the D.O.M. starts and stops with each agent, so it may have been “on the market” for 181 days, but when the new agent enters it into the M.L.S., it shows day one, which is misleading.

Some people feel that the “absorption rate” is the most accurate measure of how long it is taking to sell homes in a particular area. This rate relates to supply and demand. It indicates how long it would take to sell all of the homes currently for sale at the current monthly rate of sale, assuming no new listings were to increase the supply available.

For example, in the first half of this year there were an average of 15 homes sold per month in the Palisades. With 123 homes for sale as of June 30, there is an 8.2-month supply of homes available at the current rate of sale. Incidentally, to appreciate the dramatic shift in the marketplace during the last year, there was a 3.5-month level of inventory as of June 30, 2007.

A more refined way to gauge how long it might take to sell is to analyze the sales rate in different price ranges and specific neighborhoods. For example, as of July 1, at the last 12-month rate of sales, there was about a 3-month level of homes available below $1,750,000, and 20-month supply above $4 million in the Palisades.

In a softer market such as we have now, the homes that will tend to sell quicker are those that show well and are priced within two to three percent of their actual current market value. Other factors that make a significant difference in how long it takes include the experience an agent has in understanding a changing marketplace and their marketing and negotiation skills.For the past 22 years Michael Edlen has provided real estate counseling services to prospective buyers and sellers. Most of his business is derived from a referral base of over 900 past clients. More tips and information are available on MichaelEdlen.com. He can be reached at 310.230.7373 or Michael@ MichaelEdlen.com.

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