What does it mean to measure the market? If you are looking at property to purchase, you’ll want to do more than view the comparable sales in the neighborhood. In a fast-paced Seller’s market like the one we are experiencing, you’ll want to look beyond the specific neighborhood comparable sales. You’ll want to measure the market. Sure, you’ll want to look at all the active, under contract, and, especially, sold properties from the past six months or so to gauge market activity and value, but you’ll also want to look at the broader picture.
Consider the Variables
What do I mean by the broader picture? Well, you need to consider lots of variables. Are interest rates projected to increase? What is the supply of inventory? Days on market? If you buy today, will prices continue to rise? Stabilize? Plummet? There are so many variables to consider and no one has a crystal ball, but purchasing a home (and likely your biggest investment), requires that you look at the big picture. It requires that you measure your decision. And, that you measure the market. Measuring simply defined means to estimate or assess the quality or value of something. So, how do you assess the value of your purchase? Or the market?
When I think of measuring the market, and more specifically, the value of a specific property, I think of all the variables at play specific to my client’s needs. If you are buying to stay in your home for years, your risks are reduced. In general, the market will eventually rise, even if it falls in the short term. However, if you are looking to purchase and sell in the short term, assessing value takes on a whole new meaning. There are always risks and benefits to consider. For example, you have to consider today’s prices in relation to today’s low cost of funds. Sure, prices are high, but interest rates are low. Does it make more sense to buy now, even if prices are high? Over time, will today’s competitive rates save you money?
Gather all the Data
Measuring your decision and measuring the market is a process. It entails making an informed decision on facts. Data. Do you have all the information you need to make a well-informed decision? If you want to make a measured decision, you need to gather market and economic data and seek the help of a proven professional. You’ll want to take a measured approach to your buying decisions.
Take Your Time
Here’s my advice to you. Take a breath and take time to measure your steps. Your decisions. Don’t get caught up in all the drama and hype. Buying is a lot more involved than just market timing. You need to measure everything — your own personal situation and your future goals and dreams. Finances, lifestyle, and a myriad of factors will form your decision. They all play an important role and they all play a part in how your buying process.
Look at the Big Picture
So, how do you measure the market? You measure it in relation to your own specific situation. Plain and simple. What’s right for someone else may not be right for you. Yes, interest rates are phenomenal, and yes, prices are escalating. Inventory is tight and owning a piece of paradise sounds extremely attractive. But, it only makes sense to buy if you have taken time to measure your own situation and the big picture — your personal big picture and the market big picture.
I’ve been in real estate a long time. A very long time. I’ve seen markets rise and fall. Prices escalate and prices plummet. I’ve known people who have lost everything and people who have danced their way all the way to the bank. At the end of the day, most decisions were personal decisions, and most had less to do with the market and more to do with the personal needs of my clients, their timing, and their circumstances. If we could all make buying and selling decisions based strictly on market conditions, we would be moving a lot more or perhaps a lot less. You get the picture. We would only buy in down markets and sell in up markets. But, we buy and we sell for lots of reasons. Yes, we measure the market, but more often than not, we measure our own personal circumstances and go from there.
So, how do you measure the market? You measure it by accumulating data — both micro and macro. Look at supply and demand in your neighborhood and also in the broader geographic area. Ask questions. Are interest rates rising or falling? What is the overall strength of the economy? Are there new construction starts? What are the trends in the foreseeable future? Then, you measure everything in relation to your own timing. Your own personal set of circumstances.
Buy when it’s right for you. Only, when it is right for you. Now, that’s good measure.