Real estate markets never stay the same for long and there are many factors that can influence property prices and availability. From politics to the global economy, just about every aspect of modern life can impact your local real estate market. When buying a home, it’s useful to know your numbers and have a good grasp of key market statistics.
This helps you to determine whether now is a good time to buy or not, without relying on the often-conflicting reports in the media. A good real estate agent will help you with the figures, but it’s well worth knowing what to look for as you begin to make a decision about buying a house.
Know your Numbers
If you want to get a good idea of the real estate market—be it locally or nationwide—you’re going to need to crunch some numbers. Keeping an eye on the averages enables you to determine how much you should be paying and puts you in a better position to make an attractive offer.
Keep an eye on the average list prices, as well as the average sale prices, based on all homes in the areas you’re interested in. This helps determine how much you might get away with if you make a lower offer, or how much higher you may need to bid to beat the competition. Another useful number to know is the average price per square foot, which can help you figure out whether you’d be getting enough house for your money.
It’s worth keeping tabs on the number of active listings in the areas you’re interested in, within your chosen price range. To get an idea of how hot the market is, compare this number against the number of houses sold in the last month, as well as those under contract–properties in which the seller has agreed on a price with a potential buyer, but the sale is not yet complete and may still fall through. You can then plan a buying strategy depending on the competition from other buyers.
One final key number that you should be aware of is the average time a home stays on the market before it’s sold. This is another piece of the puzzle that allows you to determine whether you’re in a buyer’s market, or a seller’s. Knowing the sales pace—how fast homes are selling—allows you to plan ahead and make the best offers you can while avoiding overspending.
Know Who and What is Selling
By carrying out a detailed analysis of the typical sellers in the areas you’re looking at, you get an idea of the kind of houses coming on the market. You can also gauge whether sellers are likely to stand firm on the listing price, or whether they’re interested in negotiating.
Take a look at expired listings from the past few months to get an idea of the types of homes that didn’t sell and at the prices they were listed at. Armed with this information, you can be more confident in making a lower offer on similar houses within the same price range.
Besides the sales price, it’s a good idea to look at the average seller concessions. This lets you know how much money sellers are willing to pay buyers to cover closing costs and additional fees, letting you work out the most suitable offer to make. If sellers typically aren’t making large concessions, it’s worth factoring this into your offer, to ensure it appeals to the seller.
Take a look also at foreclosure and short sales (distressed sales) in your area and figure out what percentage of the market they make up. If you’re interested in buying such properties, this information can help you pinpoint the best areas to look for them and give you an idea of a typical sales price.
Year over Year (YOY) Comparisons
To gain a full grasp of how the market is really looking and where it might be going over the next few months, it’s worth doing a year over year (YOY) comparison. To do this, simply take a look at the figures for the same month the previous year and compare them to current figures. By looking over the entire previous year in this way, you can spot trends in the market and get an idea of where it’s headed over the next few months.
The key stats to compare are new listings, closed sales, average sale price and expired listings. Armed with these stats you can see if you should strike now while the iron is hot or wait a few months for prices to potentially drop.
When you take a look at the market stats, it’s essential that you look at the whole picture. Use all of the most important stats to create an accurate image of the current market and to make an informed decision as to whether now is the time to buy or not. If it is, the stats can help in creating a well-thought-out offer that saves you money and appeals to the seller.
The latest national statistics for Canada can be found on the Canadian Real Estate Association (CREA) website, while up-to-date stats for across the US can be found at Realtor.com.