Glossary of Terms

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Active listing An active listing represents a home that is openly marketed according to the real estate listing agreement entered into by a seller and real estate brokerage. We measure the total number of active listings at the end of each month to gauge whether inventory levels are growing or receding. Typically a listing with an active status means that an offer has not yet been accepted for the listed home. Sometimes a listing with an active status indicates that an offer has been accepted, but the home is still actively marketed because not all contingencies in the offer to purchase have been cleared (for example, a financing or sale of home contingency).   Average price The average sales price (or mean sales price) is one of two ways we use to measure prices over time. The average price for any given time period is the sum of all sales prices during the time period divided by the number of units that sold. For example, suppose 5 homes sell for prices of $100,000, $200,000, $300,000, $500,000 and $600,000. The average price is the sum of all sales prices ($1,700,000) divided by 5, or $340,000. The average price is different from the median price in that the average price is more sensitive to high values. Usually you will see average price levels above median price levels because higher-priced homes will pull up the average but have less of an impact on the median. Average price per sold multi-family unit The average price per sold unit allows us to measure how multi-family real estate prices change over time on a per unit basis. As an equation: Average price per unit = ($ of multi-family listings sold)/(# of units sold) For example, suppose $40,000,000 of multi-family real estate sold over a 12 month period from a total of 100 listings, and a total of 400 units sold from those 100 listings (for an average of 4 units sold per listing): Average price per unit = ($40,000,000)/(400 units) = $100,000 per sold unit Days on market (expired) The days on market for an expired listing is the number of days that pass before a listing agreement between a seller and real estate brokerage expires. For example, suppose a seller and real estate brokerage enter into a 180 day listing agreement for the marketing and sale of a home. If the home does not sell and the listing agreement expires, the days on market for this expired listing is 180 days. Days on market (sold) The days on market for a sold listing represents the number of days that a home is actively marketed for a listing that sells. For example, suppose a seller and real estate brokerage enter into a 180 day listing agreement for the marketing and sale of the seller's home. If the home sells in 120 days after 90 days of active marketing, the days on market for this sold listing is 90 days. Expired listing An expired listing represents a home that has not sold within the marketing timeframe defined in the real estate listing agreement entered into by a seller and a real estate brokerage. The listing agreement defines (among other things) the sales commission, the list price, the marketing plan, and the timeframe of the agreement. If the end of the contract is reached and the home has not sold, the listing is said to have "expired". If the home sells within the timeframe of the agreement, the listing is said to have "sold". In a strong seller's market, many more listings sell than expire. In a strong buyer's market, many more listings expire than sell. Listing expiration rate The listing expiration rate measures the number of listings that expire relative to the total number of listings that either sell or expire during a given time period. In other words: Listing expiration rate = (# of expired listings)/(# of sold listings + # of expired listings) Suppose 300 listings sell and 100 listings expire during a given month: Listing expiration rate = (100)/(300 + 100) = 25%. In a strong seller's market, the listing expiration rate will be well below 50%. In a strong buyer's market, the listing expiration rate will be well above 50%. Listing success rate The listing success rate measures the number of listings that sell relative to the total number of listings that either sell or expire during a given time period. In other words: Listing success rate = (# of sold listings)/(# of sold listings + # of expired listings) Suppose 300 listings sell and 100 listings expire during a given month: Listing success rate = (300)/(300 + 100) = 75%. In a strong seller's market, the listing success rate will be well above 50%. In a strong buyer's market, the listing success rate will be well below 50%. Listing Success Rate - commercial and business real estate The listing success rate in the commercial and business real estate market measures the dollar amount for listings that sell relative to the dollar amount for listings that either sell or expire during a given time period. In other words: Listing success rate = ($ amount sold)/($ amount sold + $ amount expired) Suppose $20 million of commercial and business real estate sell during the year, while $80 million expire: Listing success rate = ($20 million)/($20 million + $80 million) = 20% Note the listng success rate in the commercial and business real estate market tends to be much lower than the success rate for both the home and condo markets. Listing success rate (multi-family real estate) The listing success rate in the multi-family real estate market measures the number of units that sell relative to the units that either sell or expire during a given time period. In other words: Listing success rate = (units sold)/(units sold + units expired) For example, suppose 1,000 multi-family units sell during the year, while 2,000 multi-family units exire: Listing success rate = (1,000)/(1,000 + 2,000) = 33%  Median Price The median sales price is the midpoint price value that separates the top 50% of all sold prices from the lower 50% of all sold prices during a given time period. For example, suppose 5 homes sell for prices of $100,000, $200,000, $300,000, $500,000 and $600,000. The median price is the midpoint value that separates the top 50% of the sample from the lower 50% of the sample - in this case $300,000. The median price is different from the average sales price in that the median price is less sensitive to high values. Usually you will see median price levels below average price levels because higher-priced homes will pull up the average but have less of an impact on the median. Months of Inventory The months of inventory is a measure that identifies the amount of inventory on the market relative to the demand for that inventory. As an equation: Months of inventory = (total # of active listings)/(average # of monthly sales over the prior 12 months) For example, suppose there are 1,000 active listings on the market, and over the last 12 months 1,200 listings have sold for an average of 100 per month. Months of inventory = (1,000 active listings)/(100 sold listings per month) = 10 months of inventory. Currently there are many more months of inventory in the Dane County condo market than there are in the Dane County single family home market. Generally speaking, condo sellers face a more competitive environment than do the sellers of single family homes. Months of Inventory (commercial and business real estate) The months of inventory for commercial and business real estate is based off the active listing dollar amount and the dollar amount sold during the previous 12 months. As an equation: Months of commercial and business inventory = (total $ amount of active listings)/(average monthly $ amount sold over the prior 12 months) For example, suppose there is $100,000,000 of commercial and business real estate listed on the MLS, and over the last 12 months $24,000,000 of real estate has sold for an average of $2,000,000 per month. Months of inventory = ($100,000,000)/($2,000,000 per month) = 50 months of inventory. Months of Inventory (multi-family/residential income real estate) The months of inventory for multi-family real estate is based off the number of active multi-family units and the number of units sold during the previous 12 months. As an equation: Months of multi-family inventory = (total # of active units)/(average monthly units sold over the prior 12 months) For example, suppose there are 1,000 units of multi-family real estate listed on the MLS, and over the last 12 months an average of 50 units have sold per month. Months of inventory = (1,000)/(50 per month) = 20 months of inventory. Sold Listing A sold listing represents a home that has sold within the marketing timeframe defined in the real estate listing agreement entered into by a seller and real estate brokerage. In a strong seller's market, many more listings sell than expire. In a strong buyer's market, many more listings expire than sell. Total days on market experience The total days on market experience is an aggregate measure that we use to approximate the total required marketing time for the average single family home seller and the average condo seller in Dane County. This measure is useful because it takes into account how frequently listings sell versus expire, as well as the days on market for those listings that sell and the days on market for those listings that expire. As an equation: Total days on market experience = DOM (sold) + DOM (expired)*[(listing expiration rate)/(listing success rate)] For example, suppose during one calendar year 6,000 listings sold and 4,000 listings expired, resulting in a listing success rate of 60% and a listing expiration rate of 40%. Also suppose the average days on market for those listings that sold was 70 days, while the average days on market for those listings that expired was 120 days. Total days on market experience = 70 + 120*(40%/60%) = 150 days Currently the total days on market experience for the average Dane County condo seller is much higher than the total days on market experience for the average single family home seller. About Us This market update is provided courtesy of Dan Miller and Shawn Kriewaldt of Keller Williams Realty and DaneCountyMarket.com. For more information, please contact Dan at 608-852-7071 (danielmiller@kw.com) or Shawn at 608-212-5743 shawnkriewaldt@kw.com). Don't forget: if you're buying or selling, whether your timeline is 3 months or 3 years, we can help. Track the market and Search for real estate Did you know you can receive our monthly updates via email? Just go to our newsletter sign-up, enter your email address, and select your topic(s) of interest. 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