# Sale-to-List price ratio surpasses 100% in Reno-Sparks housing market

One of the housing market metrics I track is the “sale-to-list price ratio”. This ratio is calculated by dividing the sales price of a home by its list price, then multiplying by 100 in order to obtain a percentage.

As an example, say a home listed for \$500,000 then sold for \$489,000. The calculation to figure the sale-to-list ratio would look like this:

\$489,000/\$500,000 = 0.978
0.978 x 100 = 97.8%.

Observing the average sale-to-list price ratio for a data set of home sales can convey a sense of what discount homes are selling for. For example, if the average sale-to-list ratio for home sales in a given month was 95%, then one could say that, on average, homes sold at a 5% discount to their asking prices that month.

Of course, for any period of time, individual homes sell across a spectrum of discounts, or premiums, to their respective asking prices. These discounts/premiums are impacted by a variety of market factors — Buyer’s market vs. Seller’s market; rising home prices vs. falling home prices; economic outlook; interest rates; etc.

For these reasons a single month’s average sale-to-list price ratio is not very telling by itself. However, observing the metric’s trend over time can lend insight into the broader housing market.

Below is a chart showing the trend of the average sale-to-list price ratio by quarter over the past year.

The red line shows the sale-to-list price ratio by month (values shown on right Y-axis). The green bars show the median list (asking) price by month (values shown on left Y-axis)

As can be seen in the chart: 1) Median home list prices have been trending up; 2) The sale-to-list price ratio has also been trending up; and 3) Q1 2021 exhibited an average sale-to-list price ratio above 100%.

An average sale-to-list price ratio above 100% indicates that, on average, homes are selling above their asking prices. This situation results from properties receiving multiple offers and ensuing bidding wars.

For those who’ve been following the market such a scenario should not come as a surprise. However, this phenomena is made more remarkable when one considers that the average sale-to-list price ratio has been increasing even as the median list price has also been rising.

Or, perhaps it is the increasing sale-to-list price ratio that is driving the asking prices. With the average sale-to-list price ratio now above 100% [102% as of March 2021] the upward pricing pressure on home seller’s asking prices will be greater than ever.

Where do we go from here? What are your thoughts? I’d love to hear your comments below.