Local Real Estate Markets: What To Know And Lookout For
It is easy to get confused sometimes with all the information and news about the real estate market. The market is in a constant state of change and evolution and many people make it their job to track these changes. With so much information it can feel difficult knowing how to manage your investments or brokerage. However, what should be kept in mind is that most real estate is done at the local level. Something happening in Florida, won’t necessarily impact on the Washington market.
The keys things to watch and understand are what influences your local market. Staying informed about these areas can keep you ahead in a growing market or alert you to a declining one.
Demographics. A vital key to understanding any local market is the demographics. Having the right statistics and knowing how to interpret them, can tell you whether a market is growing, declining or changing in any way. Local demographics include things as diverse as average age, crime rates, unemployment figures, household income and such. Relying on just one or a few of these, can give you a misleading picture of the market. As such, you should aim to gather as much information as possible and know how to interpret it correctly.
You can find a lot of this information on local websites. For those who can’t, government offices will be happy to provide the information you seek.
Inventory. Like every market, real estate is based on supply and demand. Knowing the size of the local inventory and what makes up the majority of the properties, can give you important insights into the market. For instance, if there is an increased supply the buyers are in the stronger position. They can pick and choose among any properties and sellers will need to be more open to negotiation. The natural result of this is lower prices.
Understanding the types of properties on the market is also a vital part of this. A market that is flooded with foreclosures and bank owned properties can seem like a goldmine for scooping up cheap properties but be warned. Just because you can get a property at a discount, doesn’t mean you’ll be able to easily sell it.
For markets with limited inventory, it’s the sellers that have the upper hand. Buyers should always ask their agent about the current inventory, before making any offers.
Foreclosures/Short Sales. Knowing the number of foreclosures and short sales in your market, can help you understand it better. Just one sale of a foreclosed property, can affect comparable sales for every other property. This also applies to properties up for sale or homeowners looking to refinance their homes. A market with too many foreclosures makes it difficult to raise prices. To find the foreclosure numbers in your local market, you can visit the town hall. Don’t just look at foreclosure volume, check the numbers going back at least six months.
Average Days On Market. Simply looking at flat sales volume over the last 12 months, will not give you a good estimate of the future. This is just a snapshot of what has already happened. To better understand where things are going, you need to look at the average number of days on the market. Knowing the average, will give you a better indication of what’s to come. If the average number of days has been going down, it indicates that demand is increasing. If it’s been going up, that suggests either poor inventory or that buyers could be looking elsewhere. Either way, it suggests a falling market is on the way.
Average Price. Typically, rising prices suggests the market is more desirable while falling prices suggests the opposite. As simple as this seems, there’s a little more to it than meets the eye. When looking at changes in prices, you need to investigate as much data as possible. It can often be the case that, one or two high-end sales completely changes the average sales price. A far more reliable number is the median or mean price. These give you the highest and lowest sales prices, providing a more accurate picture of the current market.
Pay close attention to each of these areas and you’ll have a far better understanding of your local market. Knowing the market means having a better idea of what’s coming and how to make the most of any current conditions.