Keep an Eye on Your Local Market

Thursday, 15 September 2011

For the past three years, the real estate market has been struggling. Prices have been hit hard and many are waiting around for relief, increasing demand for rental properties and apartments. The following are some tips for understanding the market in your area and being able to get a slight idea of when things will turn around.

•    National averages are not a good idea to base your ideas or judgments on. All real estate is local and although national averages seem like good data, they don’t apply to your specific location. The economic condition of the area you are in is what really matters.
•    Employment statistics in your locale will also help to give an idea of what is going on with the real estate market. People need jobs to buy homes, so if employment is declining, housing will be declining as well. If the population is rising and employment is improving, housing will do so as well. 
•    Applications for building permits and residential projects are important as well. They will indicate the amount of building that will take place over the next year; if applications are on the rise, then building will obviously increase, showing that there is a believed demand for that location. New construction will not commence if there is no demand.
•    Remember to be a smart buyer and keep an eye on things that are called bargains but may not be. Research is very important and you may be getting more than what you realize when something is sold “as is”. Hire an independent home inspector to assure that these surprises aren’t as unpleasant as they could be. 
•    Three local stats to keep an eye on are inventory, time on the market and the spread. 

The inventory, or number of houses for sale, divided by the average number of sales per month gives us an idea of how many months’ worth of inventory we have. If that number falls or remains low, the market is healthy, but if there is more than 12 months of inventory, there could be trouble. 

Time on the market is important because it indicates how long it takes to sell. If it is taking less time to sell homes, then the market is taking a positive turn.

The spread means the difference between the list price and the sale price. A healthy market sees a 5% difference or less, but if this number is higher, then the market is still weak.

Source: www.mint.com