Why are market statistics important for buyers?
It’s an exciting time to get your pre-approval accomplished with your lender and start the journey of actively seeking homes to consider buying. But, before you let that purchasing power burn a hole in your pocket, it’s important to take the time and truly understand what the market is doing in your area. You will want to seek out the help of a professional to help you gather market data, as we have the best resources to draw from that consumers don’t have. It’s not enough to pick an area and see what homes you can find in that price range – many sellers are not realistic with their list value to begin with, and you may not know specifically what type of market environment you are dealing with as a consumer.
For starters, it’s helpful to know your market past, and your market present. Your market past is defined as recent sales in your preferred area. Recent sales are a success marker for homes that sold for their fair market value, according to current demand. When you see recent sales trend results, it helps you define value in your market present. Your market present is homes that are for sale now, and they are all in competition with one another for your money. Some owners are more motivated to sell, while other sellers are being guided by forces that have no bearing on market value. Without a clear picture of fair market value, it is difficult to be a smart consumer.
Are you in a buyer’s market or a seller’s market, and how do you determine that? Typically, a buyer’s market is a soft market – meaning, the market is flush with homes to buy, and there are not a lot of buyers competing with each other to buy them. For a buyer, that means more room for negotiating price and concessions in the buyers favor. For a seller’s market, home inventory is harder to come by. Market time averages can be as quick as 90 days or less. This usually means the market is flush with buyers, and not enough homes to keep up with the demand. Your agent should be able to explain to you what type of market you are in, and show you market data so you know what to expect during your search for homes.
Think about other factors to consider that have an influence on your market. Who are the major employers for the area, and are they expanding or downsizing in the next few years? How healthy is the local economy? What is attracting or not attracting growth for your market area? Getting a good deal on a home is only part of the challenge. You should also be concerned with knowing that your home will still hold its value and potentially gain equity in the coming years.
Another very important item that should be in your home purchase plan is resale value. Using similar research with your past market, you and your agent can determine what has been the average growth (or decline) for your market, and predict a modest growth plan for the next 5 to 10 years. Regardless of whether you plan to sell in the future or not, you should know what your options are and what they will be in the coming years. Added to that mindset of resale value is careful consideration of the home itself. Is the home you are purchasing a unique home, or more of a mainstream home? A home that is more mainstream and centrally located within town is a safer bet for resale than a home that is more custom and less ordinary. Older homes can be charming, but can also be challenged with functional obsolesce. What is the condition of the home now? Are there any major repair or replacement costs to expect in the coming years, such as the roof or appliances?
After taking time to understand the condition of your market and how to interpret value, now you know what to expect, and you can appreciate the need to develop a strategy for success in making a wise choice with your home purchase. Whether this home you purchase will be the only home you ever own, or one of several homes, fortune will always favor the prepared. Take your time and think your decision through, you’ll be glad you did.
Are you in the market to buy, and are not committed to an Real Estate agent? I have many years of experience in Residential Real Estate, we should meet soon and discuss your plans for the near future. Let’s love your new home together!