Since we are currently experiencing a historic period, with regards to ever-increasing prices, a lot of homes seem to be selling, because some people seem to think, this is the way the real estate market always is, rather than considering the bigger picture. =! In fact, historically, this market often fluctuates, sometimes acting as a seller’s market, while other times as a buyer’s market, or neutral! Although, over time, home prices have kept up with, or even slightly exceeded, inflation, there is no consistent trend as to how this occurs! How long the current conditions will continue and what might happen next, as well as the timing of this, is uncertain and of course not guaranteed! After more than 15 years as a licensed real estate seller in New York State, I have seen many different market conditions, and I believe, in the big picture and over time, there are at least 6 issues, impacting in pricing. With that in mind, this article will attempt to consider, examine, review, and discuss these, and why they are important.
1. Offer and demand: In the long run, the economic concept of Supply and Demand is probably the most relevant single condition in what happens with pricing. What this simply means is when the number of sellers, beats, With the number of potential and qualified buyers, home prices will typically not increase, but when there is a lack of inventory (homes available for sale, on the market), prices go up! When things are in the middle, we witness a neutral real estate market! Currently, the reason we are seeing such an extreme amount of price increases is the consequence of shutting down economies etc., lack of inventory, lots of buyers etc., and a perception, apparently, that that it is time, for them, to act!
2. general economy; Consumer/Labor Confidence: Whether it’s the general economy and actual conditions or just a perception, when buyers are optimistic prices rise and often the opposite is true when they are pessimistic! Also, the degree of consumer confidence, as well as belief in job security, etc., makes a big difference!
3. Buyer and Seller Perceptions: When buyers perceive real estate as bargain, significant value, and viability, it drives them to offer higher prices and sometimes even creates bidding wars! However, when sellers get greedy and offer their homes for too high a price, it often slows down this trend!
4. Mortgage Rates: When mortgage rates are low, it allows potential buyers to get more home for their DollarsBecause your monthly installments/payments are lower! Today’s market is, in a way, a Perfect Storm, with low supply, high demand and historically low mortgage rates.
5. Local problems (positive and negative): Many believe that much of real estate is local, because local issues, whether positive or negative, often create conditions that make an area more or less attractive, so! These include: security/crime; conveniences; transport; education/schools etc!
6. How a house compares to other similar ones: Qualified real estate professionals, create, fully prepared, relevant, CMA or competitive market analysis, which compares a specific property with other comparable/similar properties on the local market at the time.
If you are planning to buy or sell a home, doesn’t it make sense to understand the factors involved? Will you become a more educated homeowner or buyer?
