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An analysis of Time On Market and Advertised to Sale Price Differences OVER TIME Peter Rossini*, Valerie Kupke, and Paul Kershaw University of South Australia & Stanley McGreal University of Ulster & University of South Australia European Real Estate Society Conference Milano, Italy, 23-26 June 2010 Introduction • TOM measure of the buoyancy of the REmarket. • This preliminary study uses data from 24 quarters from 2003 to 2008. • 77,176 observations - over 55% of all market transactions of detached residential properties • Data combines transaction records with details of property marketing data from RPData. • Use TOM and first to last advertised price and across the different locations and for each property type. Time on Market Indicators for Adelaide, South Australia Slide 2 Changing TOM Distributions Time on Market Indicators for Adelaide, South Australia Slide 3 Median TOM over time Time on Market Indicators for Adelaide, South Australia Slide 4 Median TOM & % Change Price Chart of Median TOM and % Change in Median Price 50 8.00% Correlation =-.789 6.00% 35 5.00% 30 4.00% 25 3.00% 20 2.00% 15 1.00% 10 0.00% Median TOM* 5 -1.00% * Authors Research ** ABS Establish House Price Index (Adelaide) Time on Market Indicators for Adelaide, South Australia 2008Q4 2008Q3 2008Q2 2008Q1 2007Q4 2007Q3 2007Q2 2007Q1 2006Q4 2006Q3 2006Q2 -2.00% 2006Q1 2005Q4 2005Q3 2005Q2 2005Q1 2004Q4 2004Q1 2003Q4 2003Q3 2003Q2 2003Q1 2004Q3 % Change House Prices** 0 % Change in Median Price 7.00% 40 2004Q2 Days on Market 45 Quarter Slide 5 TOM by Year and Region Year Region Total 2008 2007 2006 2005 2004 2003 Central 15 22 22 22 22 29 22 Western 15 22 36 29 23 29 23 Coast 15 22 36 29 23 29 24 South Western 15 22 22 22 20 26 22 South Eastern 15 22 29 28 22 33 23 Inner Northern 15 22 36 29 22 29 23 North Eastern 8 22 36 31 22 37 25 Northern 8 29 50 50 31 45 36 15 30 50 43 32 43 35 8 27 36 30 21 34 26 15 22 36 35 22 35 28 Hills Southern Total Time on Market Indicators for Adelaide, South Australia Slide 6 TOM by Region Median TOM – Houses 2003 Median TOM – Houses 2008 45 8 15 15 15 15 8 29 29 15 29 15 26 15 8 Time on Market Indicators for Adelaide, South Australia 37 29 33 43 34 Slide 7 TOM by Year and # Main Rooms Year Main Rooms 2003 2004 2005 2006 2007 2008 Total 3 15 16 36 28 23 43 23 4 15 22 29 29 22 30 22 5 8 22 35 29 21 32 22 6 15 22 37 36 22 35 28 7 15 29 43 37 27 37 29 8 15 30 43 43 36 47 36 Total 15 22 36 35 22 35 28 Time on Market Indicators for Adelaide, South Australia Slide 8 Hazard Model Year, Regions, Rooms, Land Area Omnibus Tests of Model Coefficients a,b Overall (score) -2 Log Likelihood 1553246.123 Chisquare df Sig. 7116.479 20 .000 Change From Previous Step Chisquare df Sig. Change From Previous Block Chisquare df Sig. 6192.208 6192.208 20 .000 20 .000 Variables in the Equation B SE SALES.Year Wald df Sig. 5066.966 5 .000 Exp(B) SALES.Year(1) .830 .014 3360.802 1 .000 2.294 SALES.Year(2) .198 .012 253.100 1 .000 1.219 SALES.Year(3) -.075 .012 36.592 1 .000 .928 SALES.Year(4) -.058 .012 22.943 1 .000 .943 SALES.Year(5) .168 .012 197.472 1 .000 1.183 893.319 5 .000 ROOMSCat(1) .251 .052 23.434 1 .000 1.285 ROOMSCat(2) .311 .018 300.658 1 .000 1.365 ROOMSCat(3) .329 .012 739.585 1 .000 1.390 ROOMSCat(4) .220 .013 294.972 1 .000 1.246 ROOMSCat(5) .122 .014 1.130 ROOMSCat SALES.Region 73.190 1 .000 773.078 9 .000 SALES.Region(1) .040 .016 6.150 1 .013 1.040 SALES.Region(2) -.026 .014 3.352 1 .067 .974 SALES.Region(3) -.041 .016 6.123 1 .013 .960 SALES.Region(4) .154 .017 85.468 1 .000 1.166 SALES.Region(5) .024 .017 2.036 1 .154 1.025 SALES.Region(6) -.031 .017 3.174 1 .075 .969 SALES.Region(7) -.007 .013 .315 1 .575 .993 SALES.Region(8) -.202 .011 329.368 1 .000 .817 SALES.Region(9) -.245 .027 81.317 1 .000 .783 .090 .069 1.727 1 .189 1.094 LandArea Time on Market Indicators for Adelaide, South Australia Slide 9 Hazard Model Year, Regions, Rooms, Land Area Time on Market Indicators for Adelaide, South Australia Slide 10 Using Hazard Models to develop an index • Two methods used to estimate this index. • 1 - single Cox regression (hazard model) is estimated - dummy variables or each quarter with region, main rooms and land area • 2 - series of Cox regressions with two quarters of data and one dummy to indicate the change with region, main rooms and land area. • Index created from the odds-ratios – from the exponents of the coefficients. Time on Market Indicators for Adelaide, South Australia Slide 11 TOM index based on median and hazard model results TOM index based on Median, Single Cox and multiple Cox Regression models 3.5 3.0 Medain TOM 2.5 2.0 1.5 Median TOM* Multiple Cox 1.0 Single Cox 0.5 2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 0.0 Quarter Time on Market Indicators for Adelaide, South Australia Slide 12 Plot of hazard model odds/ratios over time 1.600 1.400 1.200 4 Rooms 5 Rooms 1.000 .800 .600 6 Rooms 7 Rooms .400 .200 8 or more Rooms .000 Time on Market Indicators for Adelaide, South Australia Slide 13 Plot of hazard model odds/ratios over time 1.600 1.400 1.200 Western Coast South Western 1.000 South Eastern Inner Northern North Eastern .800 Northern Hills .600 Southern .400 Time on Market Indicators for Adelaide, South Australia Slide 14 First to Last Advertised price over time First to Last Advertised Price Change 20000.00 8.00% 7.00% 10000.00 .00 Price Difference 5.00% -10000.00 4.00% -20000.00 3.00% 2.00% -30000.00 1.00% -40000.00 %Change in House Price 6.00% 0.00% -1.00% 2008Q4 2008Q3 2008Q2 2008Q1 2007Q4 2007Q3 -2.00% 2007Q2 2007Q1 2006Q4 2006Q3 2006Q2 2006Q1 2005Q4 2005Q2 2005Q1 2004Q4 Percentile 05 % Change House Prices** 2004Q3 2004Q2 2004Q1 2003Q4 2003Q2 2003Q1 -60000.00 2003Q3 Percentile 95 Median 2005Q3 -50000.00 Quarter Time on Market Indicators for Adelaide, South Australia Slide 15 First Advertised to actual sale price over time First Advertised to Sale Price Change 100000.00 8.00% Percentile 95 Percentile 05 Median % Change House Prices** 60000.00 7.00% 6.00% 5.00% Price Difference 40000.00 %Change in House Price 80000.00 4.00% 20000.00 3.00% .00 2.00% -20000.00 1.00% -40000.00 0.00% 2008… 2008… 2008… 2008… 2007… 2007… 2007… 2007… 2006… 2006… 2006… 2006… 2005… 2005… 2005… 2005… 2004… 2004… 2004… 2004… 2003… -2.00% 2003… -80000.00 2003… -1.00% 2003… -60000.00 Quarter Time on Market Indicators for Adelaide, South Australia Slide 16