Market Action Index

What is this thing called the Median Market Action Index?

One of the unique market statistics provided in the Altos Market Reports on
our website is their proprietary “Market Action Index” (MAI). Some of our
clients ask about this stat and what the heck is 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.
So the MAI was developed  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 the 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.