The Toronto Real Estate Board (TREB) took an important step towards providing its over 50,000 members with more accurate data. It will do this by adjusting how it calculates the amount of time a property remains on the market.
Previously, TREB calculated a property’s days on market (DOM) by only analyzing the amount of time it took to sell a home on an individual listing.
Previous methodology of days on market
Under the previous algorithm, if a property lists on the 30th of March, and we calculate its DOM on the 4th of April, that property has a DOM of 5 days.
Though this calculation seems pretty straight forward, it is incomplete. It does not take into account whether the property had been previously listed. It does not look at how long that listing lasted before termination. And it does not look at whether it had experienced price drops, etc.
Why change days on market statistics?
The need to change the way TREB calculates a property’s DOM was highlighted by a new study published in March by TREB’s director of market analysis Jason Mercer. In it, Mercer shows that “properties that have had at least one list-terminate-relist cycle before selling have an average days on market substantially higher than properties that were never terminated and relisted.”
Mercer goes on to say that “Since January, 2003, the average spread between the ‘Avg. LDOM [Listing days on market]’ statistic and the new ‘Avg. PDOM [property days on market]’ statistic was approximately eight days. In February, 2019, the spread was approximately 11 days.”
It’s not hard see why it’s tempting to relist an unsold property. After all, the longer a property stays on the market, the less attention it attracts. But before this study was published, it wasn’t exactly clear exactly how widespread this practice was.
Mercer’s report shows that as of February of 2019, 20% of all sold listings in the GTA were part of a relisting cycle. And over the entire period covered by the study, the average was 16%.
The study also reveals that in periods of housing market uncertainty, such as when the Ontario Fair Housing Plan and the OFSI mortgage stress test were implemented, the percentage of homes sold as part of a relisting cycle shot up to around 25-30%.
Now that this calculation has been amended, Mercer expects that TREB’s reports will include the accumulated PDOM stat. This could happen as early as April’s report, and will provide its members with more accurate data.