January 14, 2010
Ken Fears, Manager of Regional Economics
Many real estate practitioners are well familiar with the name SentriLock. They are the makers of the Lockbox NXT property access control system used by Realtors® to access and tour homes. In the past 5 years, SentriLock's products have steadily improved and today each Realtor® uses a unique code to open a SentriLock box. When opened, a lock box stores the unique user code and the number of times that the box has been used on a SentriCard, an industry exclusive smart card. This data can in turn be used to measure how many showings are being given in a specific area…foot traffic: data with significant potential for market analysts.
SentriLock, LLC. was kind enough to provide NAR Research with monthly data on the number of showings, number of cards (unique IDs used to access a lock box), and the number of showings per card for 161 real estate boards from 2005 through the present. A simple graph of the data for Indianapolis shows the strong relationship between the volume of showings and the volume of listings under contract or pending sale.
To analyze the data further, a weighted index was created to measure the percentage change in the number of showings from one month to the next. This index was then compared to the change in NAR's existing home sales and pending home sales each month. Not surprisingly, this showings index tracks NAR's pending home sales (PHS) index very closely as shown in the graph below. Statistical tests show that there is a strong correlation not just in the same month, but in the subsequent month meaning that an increase in showings in January would result in an increase in contracts in both January and February. In short, it may take a few weeks for people to find their dream home after starting the search.
Similarly, changes in the showings index preceded changes in the existing home sales figure by roughly two to three months. This finding makes sense as it normally takes six weeks to two months to close a contract. Thus, from the initial rise in showings to the increase in EHS, roughly three months elapse. Statistical tests were also run to confirm the power of these results.
The evidence suggests that showings data, like pending data or contract data, is a useful indicator of possible future sales. However, there are other factors that influence the relationship between showings and contracts. For instance, a drop in mortgage rates might cause buyers who are under contract to shop for better rates, extending the time between a showing and the sale of property.
Another limitation of the showings data is the geographic coverage. The data sample from SentriLock is well spread geographically, but only represents a small share of the total real estate boards in the United States. As SentriLock's market share increases and as a longer time-series of data is collected, this sample will improve to more accurately reflect market conditions for the entire United States. Still, the SentriLock data can provide valuable insights into the mechanics of a single market like Indianapolis.
Despite some limitations, showings data has the potential to be an indicator of future activity and a leading indicator for the industry. As time elapses, Sentrilock's repository of historical data will grow as its market coverage expands making this data more representative of national trends. Furthermore, a weekly index of showings data could provide a 2 to 3 week leading indicator for NAR's pending home sales index. Time will tell how the market uses this data or if it will choose to walk on by.
For more information on SentriLock and their products visit http://www.sentrilock.com/
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.
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