The Market Action Index

[scott14]

One of the unique market statistics provided in the Altos Market Reports our proprietary "Market Action Index" (MAI). Some of our subscribers ask about this stat and why we created it. In short, there are times in a market (both city and zip code level) that some of the key market stats that we use to analyze a market run counter to each other.

Maybe median price is increasing at the same time that inventory levels are increasing while days-on-market is relatively flat. Using these three market stats individually makes it difficult to determine what is exactly is going on. We developed the MAI to roll together some of these key stats (and a few others) to generate a number, indexed to "30", to determine if the local market is trending towards a "buyer's market" or "seller's market."

From our reports:

"Residential house prices are a function of supply and demand, and market conditions can be characterized by analyzing those factors.

"The Market Action Index (MAI) illustrates the balance between supply and demand using a statistical function of the current rate of sale versus current inventory. An MAI value greater than 30 typically indicates a “Seller's Market” (a.k.a. "Hot Market") because demand is high enough to quickly absorb available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a "Buyer's Market" (a.k.a. "Cold Market") where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall."

Keep in mind that an MAI value close to "30" probably means that the local market is balanced or neutral. So if the MAI for your local market is somewhere between 27-33, then it's likely to be either a buyer's market or seller's market based on the individual street or home area that a particular property is in.

We recommended using the Market Action Index with your clients to support your presentation about listing prices, offer prices, or other important client conversations where you might need some supporting data to back your argument.

We'd love to hear about specific situations from you about your use of the MAI or questions that you have. Post your questions right here on this Forum!

If you are a Home Buyer or Seller, our Market Intelligence Reports provide a complete analysis of the city that you choose, and includes a breakdown by zip code for each zip in your city. You can read more about these reports here:
http://www.altosresearch.com/altos/solu ... llers.page

And if you're a Real Estate Agent, our complete marketing solutions help you better communicate with your clients in any market:
http://www.altosresearch.com/altos/solu ... onals.page

If you're a Financial or Corporate Researcher, our Data Services enable you access our Data & Marketing Analytics Platform for housing market forecasting and modeling:
http://www.altosresearch.com/altos/solu ... orate.page

RETURN TO FREE RESEARCH:
http://www.altosresearch.com/research/CA/SAN+JOSE

[mikeadmin]

I like to describe the Market Action Index as:

A single stat that answers, at-a-glance, "How's the market?"

[johnson_hill]

Hi
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