Tip of the Week: Rolling 12-Month Data View
Analyzing market data through graphs and looking for trends can be tricky because the data points sometimes change drastically from month to month. For example, if a brand new condo building was built in October 2018, home sales may have seen a large spike that month, when October is usually a slow sales month. Thankfully, when creating charts in InfoSparks (a NorthstarMLS core service & market analysis tool), there is an option to use a “rolling” data view to smooth short-term fluctuations and highlight longer-term trends you are looking for.
By using the Rolling 12 Months, you can educate buyers and sellers on basic fundamentals of statistics and provide meaningful information that can be used to make buying and selling decisions. Each data point on the line graph represents 12 months of activity up to that point in time. The sample set will be larger for more meaningful trend analysis. Note how much smoother the line is when using the Rolling 12 Months calculation.
Infosparks Metric Spotlight
: Months’ Supply of Inventory
Months’ Supply of Inventory (MSI) is a calculation that quantifies the relationship between supply and demand in a housing market. If new homes stopped entering the market, how many months would it take to burn through all of the homes currently available for sale? MSI answers this question.
Typically, MSI is calculated by dividing the current month’s inventory figure by a rolling 12-month calculation of pending sales. It’s also possible to use monthly pending sales, monthly closed sales or rolling 12-month closed sales, but Infosparks (a NorthstarMLS core service) uses the rolling 12-month pending sales figure to adjust for seasonality and to retain the forward-looking, predictive nature of pending sales rather than the past-oriented closed sales figure.
Often, MSI is mistaken for an inventory-only related metric. MSI is related to inventory but is not solely impacted by inventory. It speaks to the relationship between inventory and buyer activity.
Generally, a balanced market will have an MSI between 4.0 and 6.0 months. If MSI is displayed as less than 4.0, sellers have gained asking power. If MSI gets above 6.0, buyers have gained negotiation power.
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Tip of the Week – Rolling 12 Month
Because of their volatile nature, stats based on small geographic areas can appear distorted. Provide your clients with a realistic picture of smaller markets by adjusting for seasonality and small sample sizes.
By using the Rolling 12 Months calculation in Infosparks, you can educate buyers and sellers on basic fundamentals of statistics and provide meaningful information that can be used to make buying and selling decisions. The concept of rolling 12 months is quite simple. Each data point on the line graph represents 12 months of activity up to that point in time. The sample set will be larger for more meaningful trend analysis. Note how much smoother the line is when using the Rolling 12 Months calculation.
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