There’s always something to howl about

Where is the Real Estate Market Going Today???

If you are like me, you have a random sampling of news websites to keep you abreast of the happenings of the world every hour or so.  It’s the age we live in; every data point, story, press release, blog post triggers a monsoon of pundits and analytical analysis that either sends you running for the hills or tripling down on your latest investment.  If you don’t believe me, scroll through this reputable blog and tell me how I should be the most confident in years on Tuesday then be disappointed in home sales twice only a week later.  With everything out there, how do you find the truth?

First, understand the underlying data.  As it relates to real estate, one needs to be especially cautious.  Data may or may not be adjusted for seasonality, it may or may not be a selection of particularly poor or particularly good markets, it may be new homes vs. existing homes, etc.  With the need for new headlines every hour, data can and will be manipulated to tell whatever story is the flavor of the moment.  Personally, I always start at one of the sources.

Second, understand the basics of real estate.  Unlike the stock market, real estate is slow moving, plodding, and a hyper-local asset class.  Despite what the headlines might say, you have not missed the bottom in many locations.  If you are looking to buy a single family home, tomorrow will be just as good a day as yesterday, as will six months from now.  Interest rates tend to move on a quarterly basis and rarely increase more than 0.25% in that time span.  Sure, your neighbor might have a 3.75% interest rate, but your 4.25% will put your payments close enough and will still be historically, the lowest in our history.

Investors will likely need to act with more urgency.  In most of the hardest hit markets, institutional investors (i.e., private / public corporations with lots of money to spend) have quietly been buying up homes at a breakneck pace.  Trying to find a bargain in Florida or Nevada is no longer a slam dunk.  Additionally, finding lenders that will do anything beyond the bread and butter multifamily investment will also be a challenge.  Small investors had a great window 12 months ago, but now that window is closing rapidly.  Rapid in real estate could mean six months from now, but it could also mean yesterday.

Last, but most importantly, understand your market.  National real estate statistics rarely add value to a local buyer.  Real estate is cyclical everywhere; however, the size and length of the peaks and valleys can vary dramatically.  If GM moves a plant in your neighborhood to another state, you can bet prices will move aggressively downward no matter what the national real estate market is doing.  Understanding this differentiates great realtors from the rest of the pack.

Amazing realtors don’t parrot pseudo-facts from newspapers or websites; they utilize stats to enhance their local market knowledge.  Acting as the knowledgeable voice of reason to clients inundated with misinformation will only serve to build trust and respect for your craft.


11 Comments so far

  1. Mary Elizabeth Allen July 27th, 2012 1:50 pm

    I wish I could get every single national media outlet to read this post. While yes, there are very occasional “national trends” – i.e., the bursting of the bubble across nearly all of the United States – real estate always has been and always will be local and hyperlocal. Thank you for a very well-articulated post!

  2. Brewer Caldwell Property Management July 27th, 2012 4:29 pm

    I agree it is entirely local and this article does a great job articulating that!

  3. Sean Purcell July 30th, 2012 7:54 am

    Great post Michael. I would add one other point: the usefulness of the real estate news and trends, depends a great deal on whether you are a homebuyer, or an investor.

    A homebuyer (at least, one who is not still under the delusion so many of us shared: that their own home is simply an investment for making money), should buy a home when they are financially ready and desire a place to call their own – property taxes notwithstanding. 🙂 An investor, on the other hand, (like you Michael) has a lot more interest in market timing, trends and cost of money. Too many residential real estate agents think they are investment advisors, when instead they should be neighborhood home experts…

  4. Cooksquared July 30th, 2012 10:29 am

    I still go back and forth on the your primary residence being an investment.

    As it relates to the decisions you make with your personal home, you should consider your life circumstances. If you really want a 2 bedroom 4 bathroom house, then by all means get it, but you should understand the implications of what that will do to the value of your home.

    That feels like a broad enough topic that I might try to tackle it in my post next Friday. I dont think its as cut and dry as your primary residence is not an investment.

  5. Gregg N July 30th, 2012 4:38 pm

    Great post! I think that the best information I took away from out of this article, is to understand your market. You need to know exactly what your market wants and needs and cannot go into it blind. The better you understand your demographics, the better you can utilize resources to help in selling.

  6. Lisa Phillips July 30th, 2012 5:04 pm

    I think the saying “all politics is local” can very well apply to real estate — “All real estate is local.” For instance, in California the real estate market can vary drastically from city to city. Last week the highest level of distressed properties were in Stanton at 52% and while Corona Del Mar was at 2%; both cities are in Orange County, CA. I do not think any National real estate statistics or trends can properly explain this.

  7. […] Where is the Real Estate Market Going Today??? How do you find out what’s REALLY going on with the real estate market? […]

  8. Last week’s best real estate stories August 2nd, 2012 12:11 pm

    […] Where is the Real Estate Market Going Today??? How do you find out what’s REALLY going on with the real estate market? […]

  9. real estate agent insurance August 2nd, 2012 1:30 pm

    You’re definitely correct in knowing your local market more than anything else. Although the national level is a very important factor to look into, it won’t help close a sale in the way knowledge of the local market can.

  10. Ray Smiley August 3rd, 2012 10:51 am

    Great post! When you mentioned the part about understanding your market and how amazing realtors don’t memorize facts like parrot. That really hit home. I can’t tell you how many times I’ve talked to realtors or others who claim this and that about the data but never understand the full context of it as well as if it’s adjusted for seasonality or not.

  11. Stew Coleman August 15th, 2012 9:00 am

    Excellent post! You articulate the feeling that many of us go through every day. I have so many subscriptions to these news outlets that try to keep me informed that it makes my head spin. It’s important to remember that real estate has been and will always be local.