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What Pros Know About Market Conditions That You Don’t

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Professional investors in real estate have an advantage over you, whether they are purchasing a home like you are or a commercial property like an office building. The advantage I’m talking about isn’t a close relationship with a banker or a lot more available money – it’s what they know about markets that you (probably) don’t.

Most home buyers and sellers get a majority of their information about the state of the real estate market either from news or from friends, neighbors, family and co-workers. Unfortunately these sources of information are only minimally helpful when you’re looking at selling or purchasing a home.

The news often presents info that is too general or that covers too broad of an area. Only locally focused info is useful for a seller or buyer and the more focused the better.

Friends, family and co-workers often present information that they heard from someone else and the accuracy of info passed on from person to person can suffer or have some exaggeration involved.

Besides these problems, even accurate information is only as valuable as it is put into context. This is a key point that most people don’t know about but most professionals who know what they are doing do know about.

The More Local the Better

It is common to hear information on the nightly news shows or cable news shows about the real estate market. You will hear if the market is up or down or if it does something ‘unexpectedly’. In almost every case they are talking about the national real estate market – meaning the totals for all of the United States. The problem with this information is it doesn’t really apply to any specific area. So you need to get information and statistics about your city, neighborhood or community.

If you were to view the statistics for Los Angeles real estate you would see a picture of the real estate market for ALL of Los Angeles combined. But Compton’s real estate market is not going to be the same as Pasadena’s, and Pasadena’ won’t be the same as Beverly Hills or Malibu.

So when you are starting the process of buying or selling you need to know what the market conditions are for the city or cities and neighborhood(s) you are looking into.

What the Numbers Really Mean – Putting Them Into Context

Sellers and even some real estate agents can fall into traps when looking at local market statistics. It is common in this current market to notice there is a shortage of properties for sale which indicates that the local market is a seller’s market.  Then seeing that, at the same time, sales continue to be strong – it would be normal for anyone to assume that prices will continue to go up and sellers and listing agents would then set list prices to go up accordingly.

The same can apply to buyers in the current market where there are few properties for sale and it seems that almost anything which comes on the market has multiple offers within a day or two.  In this kind of market a buyer could think that they have to make an offer at or above full price immediately whenever a house comes on the market that fits their needs, no matter what the list price is.

There are times in some places where both of those methods of operating are correct for the local market conditions, for a period of time. However, conditions don’t stay the same and when you act based on past, old, wrong or incomplete information – the actions you take may not be in your best interests.

In my next post I go even further in explaining how this happens and will show you what is happening right now in the Glendale area which illustrates this perfectly.

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