Often the financial news media talks about the national housing market as if it's one monolithic industry that moves up and down equally across the country.
While there are macro forces, such as interest rates that influence the housing market nationally, there are local factors that are more likely to influence a particular zip code.
Understanding what a real-estate market is trending toward is vital for every successful real estate agent. You can help sellers establish the right price for their property.
So what kinds of signs should you look for, especially when it comes to a local market?
Is it better to focus on how many offers are being made on a property, or should you look at the scale of construction?
Here's what we recommend you monitor at on a local level.
1. Days On Market
If the pace of days on market increases or decreased in certain zip codes or submarkets, it typically is a leading indicator that prices will follow.
2. Local and State Government Policy Impact
Is the local or State government passing policies which will impact average household income affordability in that market? Did they pass a higher minimum wage - this will increase housing demand at the lower end and push up housing prices assuming there is no additional supply coming on to the market.
Is the local government investing in urban revitalization projects such as parks or new schools? These projects will push housing prices higher and make for good long term investments. Conversely, cutting funding for schools, teachers or police will hurt the long term value of a market.
When evaluating the health of a local housing market another leading indicator is the supply of inventory in the marketplace. When a market starts to heat up, the supply of well-located and appropriately priced homes vanishes. Prices will rapidly increase in this scenario.
4. Counting Cranes
When thinking about commercial office space in urban areas, when the skyline is littered with cranes building office space you're likely near a peak in commercial real estate. Once those projects finish there will be a glut of space available and landlords will slash prices. Once the cranes go into hibernation, that is the time to look for retail and office properties.
5. Sold vs Listing ratio
Look at the sold units versus new listings ratio. As soon as the trend goes toward an increase in units being sold and/or decrease in new units coming on the market, the market is heating up. This is one of the best early indicators and crucial signs of a local market taking off. It's the good old proven law of supply and demand.
6. Job Creation Numbers
State level job creation numbers. That is the demand side of the equation. Monitor this to know how your particular state is doing.
What indicators do you watch as a successful real estate agent? Let us know below.