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