How To Read The Real Estate Market and How To Know If You Should Buy
Pinpointing the perfect moment in time to purchase a home is easier said than done. Unfortunately, the prudence of a real estate decision often boils down to whether the market was properly timed. The challenge lies in reading the market with accuracy and knowing then the optimal time is to pull the trigger on a bid. Here is a quick look at how to best read your local real estate market.
Look at the Comps Before Considering Making an Offer
The word “comps” is used in the real estate industry to refer to comparable sales for a similar market. The comps must be analyzed in-depth prior to even considering making an offer. If the price of the home in question is significantly greater than the comps in the same neighborhood or zip code, it probably is not a good idea to roll out an offer. Furthermore, if the list price is significantly lower than the comps for homes in the area that have already sold, it might be on the lower end of the price spectrum to tempt prospective buyers into engaging in a bidding war that sends the price higher and higher.
Recognize the Cyclical Nature of the Real Estate Market
Real estate markets across the United States and beyond are naturally cyclical, meaning they go up and down across posterity. The only exception seems to be those frigidly cold winter months when prices almost always dip as fewer people are willing to purchase a home when it is absurdly cold outside. However, even if you find a fantastic home at a fair price smack dab in the middle of a brutally cold winter, there is no guarantee floating out a bid at or near the asking price will prove sufficient. The current real estate market is characterized as a seller’s market as there are comparably few homes on the market compared to years past. Furthermore, there are plenty of buyers waiting for the right property to become available and make an all-cash offer. If you roll out a fairly low bid or even if you simply meet the seller’s asking price, there is a good chance someone will submit an even higher bid.
Time on the Market
Take a close look at local properties up for sale to see how quickly they sell. If it takes several months for most properties to sell, it is an indication you can likely make a competitive bid on a home and move in within a reasonable amount of time. Alternatively, if homes in your coveted area are being scooped up left and right merely days after being listed, it is a sign you have to act quickly. Such a hot market necessitates timely bids at considerable prices to have any chance of scoring the home you have in mind. Time the market just right and you will be able to sleep soundly at night knowing your hard-earned money was well-spent.
How to Tell if You Should Buy
There is no single rule of thumb to abide by when the time comes to decide whether you should make an offer for a property or stand pat at your current digs. Weigh all the different factors that affect the decision. The amount of time the home has been on the market, the asking price, whether there is a bidding war and the home’s features all play a role in determining whether you should make a bid.
When in Doubt, use Common Sense
If you are faced with the prospect of potentially bidding a quarter-million dollars or more on a home with merely two or three bedrooms, you will likely be indecisive. After all, home prices are quite high at the moment yet continuing to pay rent is nothing but a slow financial suicide. Take a broader view of your local market when determining whether it is prudent to bid on a property. As an example, if a large local employer recently announced it will lay off hundreds or thousands of employees, waiting out the market might prove wise. Alternatively, if employers are flocking to your area, the demand for homes will continue to skyrocket for the foreseeable future. In short, use common sense. Weigh the many different factors in play, bid within reason and you will make a well-informed decision.