The Price is Right: How does listing price affect days on market?

After years of abnormally strong price growth, it can be difficult for sellers to get used to normal growth in the 3-5% range. But an expert REALTOR® can select the appropriate list price, and the right listing price has a big impact on the time a home spends on the market, according to our latest research.

We analyzed 12 months of sales from September 2023 to August 2024 to see if homes were under contract faster when listing prices were closer to the ultimate selling price. For this study, we assume that the ultimate selling price represents the true market value. While this may not be true for every listing, sale price becomes an accurate measure of market value once we average together all 75,000 sales from this period.

Do homes sell faster when the price is right?

Homes stay on the market longer when they are priced too high. A home listed within 1% of the ultimate selling price has a 50% chance of coming under contract within 1-14 days. A home listed 3-5% over the ultimate selling price has a 50% chance of coming under contract within 9-52 days. While in the best-case scenario, pricing the home too high by 3-5% could keep it on the market for an additional week, in the worst-case scenario it could add over a month on the market.

As listing price climbs relative to the ultimate selling price, the risk of staying on the market longer increases, especially the worst-case scenario. For homes priced at 9-11% above the sale price, half take 19-87 days to come under contract. It could take only a few weeks, but there is a real risk it could take three months.

On the other hand, there is minimal benefit of fast selling time when the home is priced too low. When listed 3-5% under the ultimate selling price, homes typically are under contract within 2-9 days. This shaves a few days off the high-end of probable time on the market, but it is not a big impact. And prices even lower than this do not sell much faster.

There is some marginal benefit to pricing low. If a seller needs a virtual guarantee of selling quickly, a lower price can help with that. For homes listed at market price, 90% are under contract within 40 days, but for homes priced 5-7% below market value, 90% are under contract within 25 days.

Buyers are smart, and most of them are working with an expert REALTOR®. This evidence shows they can accurately judge market price and move quickly on homes that are listed at the right price.

Most sellers do price their home accurately. One-in-four listings sell within 1% of their asking price, and most listings are priced within 4% of the ultimate selling price. Only one third of listings are priced over the sale price by 5% or more.

After a price reduction, does the clock reset?

Listings that must reduce their price are, by definition, on the market longer—it takes time before deciding to bring down the price. But how long will the home stay on the market after the price reduction? And how does time on the market change if the listing price is over or under the ultimate selling price?

Price reductions cause major delays, but after the final reduction, inventory does not sit for long.

Median days spent in each market period by number of price drops

Source: Indiana Association of REALTORS®
Based on 75,000 sales between Sept. 2023 and Aug. 2024

Homes that reduce their price end up on the market for several weeks longer than homes that are priced correctly from the start. For homes with one price reduction, the process typically goes something like this: The home is listed—typically at 3-11% above the ultimate selling price. These homes spend a median of 23 days on the market at the original price before sellers decide on a price reduction. After the price drop, the home is under contract in 12 days. For homes without a price drop, the median time before they are under contract is only five days.

Homes with a price drop do take longer to sell even when they reach their final listing price—just under two weeks compared to just under one week for homes without a price drop. But the real driver of extended time on the market is the period when the seller is waiting to see if a buyer offers at the original price. Whether the home drops in price one, two, or three times, this initial period typically takes three weeks. Homes with more price drops endure this pattern multiple times.

What does this mean for sellers and their agents?

It is crucial to start with an accurate list price, and that means sellers need expert representation to parse the latest data and identify a justifiable price range. Of course, agents do not choose the listing price—sellers do. This information can guide sellers to understand how critical it is to get the price right the first time.

Sellers can also take away a couple of expectations from this data. First, while days on market has risen a lot since 2021, the home sale process can still be quick and competitive for homes that are priced correctly. Second, if speed is a seller’s priority, listing at market price is the best way to move a home quickly. Listing below market price offers little improvement, though there is a marginally lower risk that the home will be on the market for several weeks.