Time on the MarketTime on the market measures demand and can be calculated using, for example, transactions that took place in the last month or in the last three months. For example, let’s assume that we have an estimate of an average time on the market of 194 days, based on transactions that took place in the last full month. This means that all houses that were sold in the last full month stayed on the market, on average, for 194 days before they were sold. We can also use the median time on the market, which represents the numeric value separating the higher 50% of the time on the market values for the transactions we are examining, from the lower half. Of course, if we want to understand where the market is going in the next 12 or 36 months, using the time on the market metric based on last month’s sales is grossly inadequate. First of all we need to see monthly or quarterly trends in this measure over the last 12 months or the last 4-6 quarters, taking into account seasonal variations in demand and transaction activity. Most importantly though, we need to understand the prospects of the underlying factors that will drive the demand for the particular property type under consideration over the next 12-36 and make an assessment based on this understanding how current trends in absorption may change within this period.
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