By Marc Padilla
So what the heck is “the real estate market,” anyway? We hear about it all the time, but what does it really mean?
For economists, the real estate market is best described as the demand for housing at any given point in time. This snapshot is then used to compare the current market conditions to those at an earlier point in time to determine a trend line. For instance, if sales have increased compared to a year ago, then the market might be said to be “up”; on the other hand, if closings have fallen, the market might be said to be “down”.
Simple enough, right? Well, that’s only one way to measure the market. The market can also be measured using several other different metrics, including the average days on the market, the average sales price, or even the average difference between list and sales price, to name just a few. This wide array of possible measurements is why if you talk to 10 different people and ask them to describe your local real estate, you might get 10 different answers.
Unlike the stock market, the bond market, or even the commodities market, the real estate market cannot be defined by large barometers or indexes. This is one reason why you can’t watch the CNN news ticker and say, “Oh honey, look – the real estate market lost 100 points today.”
So how can you determine what kind of market you have in your area? Let’s take a look at five key numbers you must know before placing your home on the market.
1 - Average Sale Price. This figure represents the combined sales prices for all of the homes sold in your local market divided by the total number of sales.
2- Average Listing Price. In contrast to what people actually sell their homes for, this number indicates the average price that homeowners are asking for when they initially begin to market their homes.
3- Average Difference Between List Price and Sale Price. This number (usually expressed as a percentage) indicates the average difference between what people list their homes for and what they eventually sell their homes for.
4- Average Days on The Market. This is the length of time that it takes the average seller from the time she begins marketing her home to the date of closing.
5- The Inventory on Hand. This number (generally expressed in months, weeks, or days) represents how long it would take to exhaust the current inventory based on the current selling rate if no more homes were listed.
So where do you find these key numbers that can help you assess the health of your own local market? Here are five ways to explore your local market without even leaving your home.
1- Call a Realtor. The fastest way to find this information is to simply talk to a local real estate professional. Realtors have access to in-depth market research, and most agents are happy to provide this information for free!
2- Go Online. Many local boards of realtors and the multiple listing services offer their market statistic to the public. In addition, many chamber of commerce organizations publish community statistics. Two new websites that provide both consumers and agents with high-quality sales data are trulia.com and housingpredictor.com.
3- Talk to the newspaper. Most newspapers have a section devoted to real estate, and many update the local market statistics regularly.
4- Talk to the assessor’s office. Local governments that tax private property have an assessor’s office whose job it is to determine the value of real estate in the community. Often this office has detailed market statistics that are of public record and may be available in the office or online.
5- Talk to an appraiser. Appraisers are typically hired by banks to assess the fair market value of real estate. Because of this, appraisers must stay current on all of the local trends in the marketplace, and they can be a terrific source of information.
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