Much like current fads in decor and architecture, the real estate market is rarely static. National trends interface with municipal laws and local developments, which can lead to disparities between markets in different areas. And since so many unique factors drive localized change, effectively assessing the market in any specific location can get complicated. Here are a few suggestions for an easy analysis of your local real estate market.
Pay Attention to Price Patterns
An integral piece of any real estate assessment is data regarding price trends in the area. Present pricing should be examined against past trends. Doing so is the first step in developing an image of market growth and expansion over decades, one that will be useful in predicting future patterns. Be aware of the degree to which price fluctuates within the range of real estate sectors and property types, as this will reveal persistent dips and rebounds in the market, and shed light on present opportunities.
Pinpoint Contributing Factors
If you’ve nailed down price trends, you are ideally equipped to examine factors affecting the state of the market. Major economic developments on a macro and micro scale contribute to shifting prices. For example, new construction–especially in the form of public facilities such as schools and hospitals–is a prime driver of market growth. Other elements of influence include local and general economic health, interest rates, property tax rates, the availability of government subsidies, tax credits and deductions for buyers and developers, regulatory policies and associated expenses, and market demographics.
Knowing the number of properties sold over a specific time period is useful in determining whether the market currently favors buyers or sellers. The total days a property spends on the market (DoM) is another indicator used to determine demand. It’s similarly telling to note the gap between a property’s initial list price and the amount it actually sells for; for instance, in a sellers’ market, it’s not uncommon for properties to receive multiple offers over asking price.
Know Local Property Types
Is your area a swath of sprawling farmland, or is it deep in the heart of a major metropolis? Are the streets packed with office buildings, or interspersed with suburban homes? Property is generally divided into three main categories: residential, commercial, and vacant land, each of which can be divided into subsets. Types of commercial property, for example, include retail stores, hotels, office buildings, warehouses, etc. Familiarize yourself with a location’s most prevalent property types, and you can identify average pricing and sales ranges for that type, which will help contextualize local data.
The forces that dictate property value, demand and supply are complex and multifaceted, but assessing real estate doesn’t have to be a headache. Applying these tips–in combination with effective systems for data gathering and aggregation–can help develop a clear snapshot of your local market.