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Why Market Data Matters Now More Than Ever

Please welcome AG’s newest contributor Mike Simonsen, CEO and Co-Founder of Altos Research, which offers live real-time real estate research. Mike is the reason you see live data graph widgets on the nation’s top real estate website and he’s the reason financial firms and traditional news sources have reliable information. Mike is a frequent public speaker (at Inman and elsewhere), is very active in social media and you can even find him on Twitter. Please welcome Mike in the comments.

On Wednesday, NAR announced that home prices fell again in January to a national median price of $170,000, sales rates fell again to their lowest level in years, and nearly half of all transactions are on distressed loans.

“Everyone knows the real estate market sucks, right? Why would I ever want to publish the bad news to my clients?”

I get this question from real estate agents all the time. Also common is it’s omnipotence-begging cousin, “Can’t you make the chart go UP for a while?”

Can't you make the chart go UP for a while?

Can't you make the chart go UP for a while?

The underlying fear is, “if I talk about the market, no one will buy or sell anything.”

Newsflash: This is precisely why market data matters. In general the market sucks and everyone knows it. But I’m not in general. I have a home to buy (or sell) in a particular price range, in a particular part of town. I have a timeframe. I have investment goals. Market data helps me understand my unique situation, sets my expectations, and compels me to take action.

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We tell people there are only three questions in real estate:

  1. What’s for sale?
  2. How much is this home worth?
  3. How’s the market?

Our industry is well tuned to answering the first two. You have your MLS, your IDX search on your site, open homes etc. You have CMAs, appraisers, and your professional opinion on property valuation. Heck you can even see the big real estate 2.0 web players focused on these two questions.

But all the other questions stem from #3. And with all the craziness out there, these are now the most important questions you can address: “How long is this going to take?”, “We like this place, do we have to make an offer today?”, “I’m thinking of buying, shouldn’t I just wait and see?”, “Why should I listen to you about where to price my home (I want to try higher)?”

Remember that real estate data is not about communicating the “good news.” It’s about illustrating why your recommendation makes sense. It’s about helping your clients see the path to their goal. In fact, the most important phrase that real estate statistics provide is: “Let me show you what I mean.”

So let me show you what I mean.

Last week the inimitable Russell Shaw posted a letter from John, an agent looking for advice about his business. Russell distilled John’s problems to:

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1. Most listings currently being taken are not selling

2. Zero buyer deals in escrow

3. Overall market has changed enough that “comps” are now meaningless

4. Not enough time left over to work on organizing for the future

Russell describes these conditions as fundamentally pricing issues – and the business challenge to get the seller to accept price reductions 2,3,4 or 5 times. I’ll add the corollary that detailed market data is the way to illustrate the strategy, the urgency to the client – to compel the client to take the right action. In this case I would illustrate to the client these statistics:

  • The days-on-market trend for properties in this price range. (“Look, it’s taking 7 months for anything to sell, because the only buyers are bargain shopping.”)
  • Percent of properties on the market with price reductions (“This is what your competition is doing. We can be ahead of this curve or behind it.”)
  • The magnitude of those price reductions (“Let’s look at how aggressive we need to be. Really.”)

The great news is that you already know the story your clients need to hear, the strategy they need to take. (Or you can visit the sage Mr. Shaw for inspiration.)  Statistics and data are not the source of this strategy. They are merely the map, the illustration, the evidence of your expertise. After all, in these unprecedented times, wouldn’t a map come in handy?

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Written By

Mike Simonsen is the co-Founder and CEO of Altos Research, the premier source for real-time real estate statistics. Altos recently won the "Most Innovative Technology" award from Inman News and has been featured recently in the New York Times, BusinessWeek, Bloomberg Television, Dallas Morning News, Seattle PI, and other national media outlets. He blogs with guilty infrequency at AltosResearch.com/blog. Follow him on Twitter for more frequent interaction.

16 Comments

16 Comments

  1. Matt Stigliano

    March 2, 2009 at 8:58 am

    Mike – First, let me say welcome and glad to see you as a new addition. I’ve seen a lot about Altos, so I feel like I’m pretty familiar with you already.

    Your point about research being a good thing, even if its bad news, is interesting. I’ve never been one to shy away from telling someone the good AND the bad, but seeing it in your post made me think even a bit more about it.

    Although I believe that we can affect potential clients with a positive attitude, I also feel that if we play the “its all sunshine and roses” card to much, we wind up losing trust, which is probably the single most important ingredient to success in real estate.

    By giving clients and potential clients a true picture of the market, you can be the expert, as well as a trusted source – for ALL the news, not just the good parts.

    Excellent article and it set off quite a few thoughts in my head, so thinks for spurring some early morning brainstorming. Now its time for me to sit in the dentist chair, so I can let my brain wander some more as that awful drill noise penetrates my skull.

  2. ines

    March 2, 2009 at 9:12 am

    Mike is in da House!!! Welcome to AG my friend!

    ….and now to your post. I think you and I have discussed this in length. Real estate is very local and when I see those generalized market trends I know they are informative, but in many cases irrelevant. Who cares what the nation’s median price is when the median price in Miami Shores (a city I farm) is $450k or the median price of a South Beach Condo is $1 million (NOT REAL NUMBERS BTW).

    Remember that real estate data is not about communicating the “good news.” It’s about illustrating why your recommendation makes sense. It’s about helping your clients see the path to their goal. In fact, the most important phrase that real estate statistics provide is: “Let me show you what I mean.”

    So I totally agree with you, but you need to do it with the correct statistics.

  3. Lisa Sanderson

    March 2, 2009 at 10:12 am

    Welcome to AG, Mike! I can’t tell you how many calls I get that say ‘I know the market stinks but I need you to let me know how we can get this house sold’. The data lays out the game plan and it is our job to show our clients how.

  4. Mark Eibner

    March 2, 2009 at 2:17 pm

    we’re at it again Why Market Data Matters Now More Than Ever: Get out of your feed reader and c.. https://tinyurl.com/b3phax

  5. sheilabragg

    March 2, 2009 at 2:27 pm

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  6. Seattle Real Estate

    March 2, 2009 at 5:18 pm

    Why Market Data Matters Now More Than Ever | Real Estate Magazine … https://tinyurl.com/b3phax

  7. Jim Duncan

    March 2, 2009 at 5:40 pm

    @mikesimonsen – Welcome to AgentGenius! https://agentgenius.com/?p=10369 (when is Altos coming to Charlottesville??)

  8. mike simonsen

    March 2, 2009 at 6:38 pm

    my first article for AgentGenius is up. w00t. Why Market Data Matters Now More Than Ever. https://agentgenius.com/?p=10369

  9. Mike Price

    March 2, 2009 at 6:30 pm

    AG couldn’t have found a better contributor! Congrats and welcome!

  10. Russell Shaw

    March 2, 2009 at 10:26 pm

    I agree with *everything* Mike Simonson says! 🙂

    Welcome, sir.

  11. Jay Thompson

    March 2, 2009 at 10:33 pm

    Mike Simonsen is a freaking rock star, an all-around great guy, and knows what he’s talking about.

    Welcome to AG Mike!

    Oh, and Altos can throw epic parties too…

  12. Missy Caulk

    March 2, 2009 at 10:46 pm

    Mike, welcome to AG. Of course you know I love my Altos Reports.

    I got three new subscriber’s this week.

    See you soon in Atlanta.

  13. Mike Simonsen

    March 3, 2009 at 9:51 am

    hey thanks everyone! great to be here. now on to writing next week’s post…

  14. Irina Netchaev

    March 8, 2009 at 10:01 am

    What took AG so long? Welcome Mike!!!

  15. Claudia Gonella

    March 8, 2009 at 1:08 pm

    “After all, in these unprecedented times, wouldn’t a map come in handy?” – Great line. The biggest problem right now is determining market value. Without data investors are at sea. (This is especially the case in many emerging markets where there are no central databases like the MLS).

  16. John Palmisano

    March 29, 2009 at 4:39 am

    Mike, great piece. We as professional Realtors need to know the market stats, nationally and locally. How else can we advise clients correctly.

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