How to Read a Local Housing Market Report Like an Analyst
Months of supply, sale-to-list ratio, days on market and median price: what the numbers in a housing report actually tell you, and what they don't.
In this article
Local real estate reports are full of numbers: median sale price, active listings, pending sales, days on market. Read them correctly and they tell you whether buyers or sellers have the upper hand. Read them carelessly and you can draw exactly the wrong conclusion. Here's how to interpret the most common metrics.
Median vs. average price
Most reports use the median sale price, which is the midpoint where half of homes sold for more and half for less. It's less distorted by a few luxury sales than the average. The median can still be misleading, though. If more expensive homes happen to sell in a given month, the median rises even when no individual home gained value. This is called a mix shift.
To track true price changes, analysts look at repeat-sales indexes such as the S&P CoreLogic Case-Shiller Index or the FHFA House Price Index. These compare the same homes over time. They're more accurate but published with a lag of a couple of months.
Months of supply: the single most useful number
Months of supply estimates how long it would take to sell every active listing at the current pace of sales, with no new listings. It's calculated as active inventory divided by monthly sales. A common rule of thumb:
- Under about 4 months: seller's market, with competition and upward price pressure.
- Roughly 5 to 6 months: close to balanced.
- Over 6 months: buyer's market, with more negotiating room and price cuts.
Because it combines supply and demand in one figure, months of supply often tells you more than inventory or sales alone.
Sale-to-list price ratio
This compares final sale prices with the last list price. A ratio above 100% means homes are selling over asking, usually a sign of multiple-offer competition. A ratio in the high 90s suggests buyers are negotiating modestly. Remember that it's measured against the final list price, so homes that had price cuts can still show a ratio near 100%.
Days on market
Median days on market (DOM) shows how quickly homes go under contract. Rising DOM is often one of the first signs a market is cooling. Be aware that some listings are withdrawn and relisted, which can reset the counter, so cumulative days on market (CDOM) is a more honest figure where it's available.
New listings and pending sales
New listings measure fresh supply coming onto the market. Pending sales count homes that went under contract. Pending sales are a leading indicator: closed sales usually follow them by one to two months, so a drop in pendings today points to weaker closed sales ahead.
Always compare year over year
Housing is seasonal. Activity typically picks up in spring and slows in late fall and winter. Comparing October with September tells you more about the calendar than about the market. Compare each month with the same month last year instead.
Where to find reliable data
- National Association of REALTORS®: monthly existing-home sales and pending home sales.
- U.S. Census Bureau: new residential construction and new home sales.
- FHFA and S&P CoreLogic Case-Shiller: repeat-sales price indexes.
- Freddie Mac PMMS: weekly average mortgage rates.
- Local MLS and REALTOR® associations: the most granular neighborhood-level data.
The bottom line
No single number tells the whole story. Look at months of supply for balance, sale-to-list and days on market for competition, pending sales for direction, and year-over-year comparisons for context. Taken together, they'll tell you which way your local market is leaning.
