In order to buy or sell a house, understanding the housing market will empower you to make the best, informed decisions. Although you can enroll in an online business master’s program to gain wisdom and insights into the financial aspects of the real estate industry, you may not need a formal education to understand the housing market.
Whether you’re a first-time buyer/seller or have been through the process a few times, understanding the housing market will still prove beneficial in either role. Two major factors to consider when dealing with real estate are supply and demand and the economy.
Supply and Demand
Understanding supply and demand and how they relate to the housing market will help you determine if it is a buyer’s market or a seller’s market. But just what’s the difference between the two and why is it important?
Knowing which market the real estate industry is in dictates who, between sellers and purchasers, hold the most power. In a buyer’s market, the buyer is in a favorable position. Simply put, there are more homes available to purchase at a lower price. So if you are in the market to purchase, this is the most opportune and budget-friendly time to shop.
On the other side of the coin, marketing your home in a buyer’s market can prove difficult. You will have to make sure to get your house listing out on as many forums as possible to let potential purchasers know what you’re offering. This is when you typically see people advertising their homes on social media, trying to appeal to a bigger audience. It is also imperative to make your home stand out and highlight the main selling features.
Inversely, if it is a seller’s market, real estate is at a premium because the availability of homes is less abundant and you will pay higher prices than a more plentiful market. Seller’s smile in this market because they will be able to seek a higher price for their real estate and they may even benefit from bidding wars between potential buyers.
The Economic Factor
Real estate and the economy have a type of cause and effect, codependent relationship of sorts. For example, if it is a buyer’s market that means house prices are down. Lower home prices mean that all houses, whether on the market or not, will have a lower valuation.
Lower house prices also mean fewer home equity loans are available for homeowners. With less money available, consumer spending as a whole will decrease. The lowered spending habits of the consumer can be directly attributed to the amount of money people have tied up in their homes and therefore is not available for putting back into the economy.
A vast majority of our economy is made up of consumer spending. Slowing the spending rate has a negative, domino effect on the economy which will eventually lead to higher rates of unemployment. Unemployment gives way to lower incomes which in turn leads to reduced consumer spending. Whereas the upside of lower home prices reduces the risk of inflation, there comes a point where the Federal Reserve needs to intervene and lower interest rates. Without more consumer-friendly rates, the economy will continue to downward spiral until it potentially hits a recession.
Although the housing market can be talked about in terms of being nationwide, and having an understanding of the current trends is useful, you need to be looking at the trends of your local market to understand how it impacts your current position. It serves you no purpose to know what is going on with the market on the west coast if you are looking to buy or sell on the east coast; disparity in the market is location-dependent because real estate is a localized industry.
With minimal research and effort, you can capitalize on the housing market if you know what to look for and how it relates to your current position.