Understand The Real Estate Market

Understand The Real Estate Market makes you a more empowered buyer or seller. The payoffs of understanding your real estate market. Use the data to evaluate your performance. Fully understand market conditions. Offer clients better advice. Position your clients’ properties against competing real estate. Create promotional opportunities.

Determining how a real estate market is trending can help you decide truly understand the market cycle and when is the right moment to act.

The association tracks the volume of closed and pending sales of existing homes in major metropolitan areas.

Whether you’re finance major or very experienced real estate agent or newbie home flipper of dreaming to be rich or from a small town and big country, if you’re in the field of real estate, these high level wisdom rules apply to your business:

1. Real estate is about Supply and Demand.

2. It is governed by the law of cause and effect.

3. Marketplace has cycle, so history repeats.

Understand The Real Estate Market

Many local Realtor associations and multiple-listing services (MLS) publish local housing market data for free.

Now some further discussion about real estate market understanding.

1. Median home prices hint at housing market’s direction:

Median home price is useful indicator of the direction of real estate markets. The median price is “in the middle” on a list of prices of sold homes. This means exactly half of the homes listed are above this price and exactly half are below. It shows general direction of house price up or down. Prices in December, January, when most housing markets are slow, aren’t comparable to prices in July, August, when markets are closing sales from the spring home-buying season. Buying when prices are rising can be frustrating. Falling prices enhance buyer purchasing power.

Median home price Impact for the buyer Impact for the seller
Increasing Challenging, bids will most likely exceed asking price Good, can expect offers above asking price
Decreasing Good, more buying power Challenging, settle for lower sale price
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NAR releases median price data quarterly for detached houses in approximately 175 metropolitan areas.

 

2. New constructions increases supply:

Homes come on the market when they’re offered by new-home builders. Newly built homes typically cost more than comparable resale homes. These drive supply, so near by home price may not go up, or goes up after long time depending on many other factors like economy, rates, demand, locations.

3. Supply and demand create buyer’s and seller’s markets:

When a many homes are on sale, but very few  people want to buy houses, it’s a good time to be a buyer, Which is called a buyer’s market. But if not many homes are for sale, but a lot of people want to buy them, it’s a good time to be a seller. This is known as a seller’s market.

Buying in a seller’s market can be difficult. The seller may receive multiple offers. If a home is highly desirable, a bidding war could drive up the price. You may have to agree to whatever terms the seller wants, even if they’re costly or inconvenient for you.

Selling in a buyer’s market can be challenging. You might not get the price you want, or the price your neighbor got a few months ago for a home that’s similar to yours. You might have to make a lot of repairs and improvements to your home to find a buyer for it.

Supply of for-sale homes Demand to purchase a home Type of market
High Low Buyer’s
Low High Seller’s

 

4. Low mortgage rates

This increases buyers’ sentiment hence will increase demand. As financing becomes cheaper, more people want to buy a home rather than rent. When rates are rising, financing a home becomes more expensive, decreasing the demand to buy.

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5. Strong economy:

Newspapers, finance sites, government agencies and local chambers of commerce can be good resources for national and local economic data. A strong local economy can be a positive factor for a strong local housing market with healthy demand and rising prices. So this scenario is best for both buyers and sellers!

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