Market Research
Real Estate Market Analysis: How to Read and Use Market Data
A real estate market analysis is the systematic process of evaluating local market conditions to determine home values, pricing strategy, and investment potential. Every professional recommendation — from list price to offer amount — should be grounded in data.
What a Market Analysis Covers
A market analysis examines supply (active listings, new listings, expired listings), demand (pending sales, closed sales, showings), pricing trends (median price, price per square foot, list-to-sale ratio), and velocity (days on market, absorption rate). Together these metrics tell a complete story about where the market is and where it's heading.
The most common form of market analysis agents produce for clients is the Comparative Market Analysis (CMA) — a property-specific analysis using recently sold, active, and expired comparable homes to estimate current market value.
Core Market Analysis Metrics
Median Sale Price
The middle price of all homes sold in a period. Less skewed by outliers than average price. Track month-over-month and year-over-year to spot trend direction.
Months of Supply
Active listings ÷ monthly sales rate. The most important supply/demand metric. Under 3 months = seller's market; over 6 = buyer's market.
Days on Market (DOM)
Average time from listing to pending sale. Rising DOM signals softening demand or overpricing. Falling DOM signals tightening competition.
List-to-Sale Price Ratio
Sale price ÷ list price × 100. Above 100% = overbid market. Below 97% = buyers negotiating discounts. Tracks negotiation leverage.
Absorption Rate
Homes sold ÷ active listings per month. Higher rate = inventory selling faster. Use to project how long current supply will last at current demand.
Price Per Square Foot
Normalizes price comparisons across homes of different sizes. Most useful in condos and townhomes. Compare within tight geographic and property type bands.
Data Sources for Market Analysis
MLS (Multiple Listing Service): most accurate local sales data
County assessor/recorder: deed recordings, public sale prices
Redfin Data Center: free market-level stats by metro and zip
National Association of Realtors (NAR): monthly existing home sales data
CoreLogic, Black Knight, ATTOM: institutional data (may require subscription)
Zillow Research: public market data, but lagging and sometimes inaccurate at micro level
FRED (Federal Reserve Economic Data): interest rates, housing starts, permits
Market Analysis FAQ
What is the difference between a CMA and an appraisal?
A CMA is a market-based opinion of value produced by a licensed real estate agent, primarily for pricing decisions. An appraisal is a formal valuation by a licensed appraiser, required by lenders for financing. Appraisals follow strict USPAP methodology; CMAs are more flexible but should follow the same comparable selection principles.
How far back should comps go in a CMA?
Use the most recent 3–6 months. In a fast-moving market, limit to 90 days. In a slow market, you may need to go back 12 months but apply a time adjustment. Lenders typically require comps within 6 months for appraisals.
How many comps do you need for a reliable analysis?
Three to five strong comps in the same neighborhood, similar size (within 20%), and same property type is the standard. In dense urban areas with many sales, you can tighten criteria. In rural areas, you may need to widen the geographic radius.
What adjustments do appraisers make to comps?
Appraisers adjust for differences in GLA (gross living area), lot size, garage bays, bedroom/bathroom count, condition, age, location, and features like pools or finished basements. Each adjustment adds or subtracts value to bring the comp in line with the subject property.