If you are planning to sell or buy a home, Homes.com’s website has tools that will help you stay on top of hyper-local trends. By tracking trends in your hyper-local market (neighborhood or community), you can anticipate price changes before they happen.
National vs. Hyper-local
“All real estate is local” is a popular maxim and it’s largely true. Ironically, it’s much easier for real estate consumers to follow national or metro-wide price trends than trends in the very local markets that matter most to buyers and sellers. Economic conditions such as local employment and income levels, natural disasters like floods or wind storms, and local new home construction that can vary greatly by locality. That said, some national events, especially changes in mortgage interest rates, affect everyone. So-called “national” prices (unlike stocks or commodities, homes are sold on a local, not national, level) are much easier to cover than the neighborhood, or hyper-local markets where houses are bought and sold.
Trends Are the Key
Trends in prices or values may be more important than specific prices. Sellers try to list their homes at a price that anticipates market trends during the two to three-month period that they will be on the market. Buyers are concerned about the much longer window in time. They want the price of their new purchase to appreciate at a healthy pace for a long time after they close. Thus, making an offer in a neighborhood where prices have just increased could be very beneficial to a buyer if it looks as though the market will continue to rise. Likewise, in a local market where prices have recently leveled or declined, buyers might want to hold off to see if the market is softening and they might get a better deal by waiting a few months.
Individual homes usually change price direction (from appreciation to depreciation or vice versa) very slowly, like an ocean liner changing course. If there is no significant change in the price patterns of nearby properties, a home’s value may continue in the same direction for years. The reason is simple. Home values are based on the sales of a limited number of similar, nearby properties while metro and “national” markets reflect thousands of transactions each month.
The period of time that a home is listed before the seller accepts a bid, expressed as time on market, is another good indication of an important local market trend. The less time homes spend on the market, the stronger the demand.
Here are four ways Homes.com can help you to monitor your hyper-local market trends:
1. Track hyper-local prices
By finding and following price trends of several homes similar to the one you want to buy, you can use Homes.com to track local listing price trends at the neighborhood level. In Home Search, enter the address of a listing of a home that you would like to monitor. Use the filters in your search function to find at least three listings that have the same number of beds and baths and roughly the same lot size. Write down the list price and date for each of the comparable listings (or “comps”) and average them.
Add each of the comps to your “favorites” list by clicking on the little heart In the top right corner of each listing. Every week check on the prices in your first list to see if they have changed and create and save a second list of comps from new listings that meet the same criteria as the first list. Add the new listings to your favorites list. Continue to make weekly lists of comps with each week’s new listings. Your list of comps will grow each week. Be careful to keep your list limited to the local neighborhood. In three or four weeks a pattern should emerge to give you a sense of list price trends.
2. Track demand
Demand and supply determine price trends. As demand increases or supplies diminish, prices will rise and vice versa. An easy way to learn whether demand is trending up or down is to keep track of the time it takes for comps that you have been tracking to sell. Scroll down to the “Price History” at the very bottom of each listing and note the date that the home was listed. When you see that one of the listings has disappeared, assume that it has sold and estimated the total number of days that the listing was on the market. The average home sells in about six weeks to two to three months after being listed. By keeping track of the time that it takes your comps to sell, you can get a sense of whether homes in your hyper-local market compare.
3. Track supply
Homes.com’s Match makes tracking supplies of homes for sale easy. Go to the Match function and set the filters for the number of beds, bathrooms and square footage of your comps. Add a filter for the price range. Match by the smallest area, whether neighborhood, community or Zip code. You may end up with just a handful of homes for sale in your inventory. Experiment by increasing the area covered by your match. Note the results and repeat on a weekly basis to get a sense of how the supply of homes in your price range and the local market is changing. Note that both demand (time on market) and inventory levels fluctuate by the season. They tend to increase during the late winter and spring and decrease after Labor Day.
4. Compare list prices with home values
If sellers are pricing their homes more than 5 or 10 percent above their value, you are probably in a sellers’ market where prices are rising quickly. When list prices trail values, which is rare, your market is a buyers’ market where prices are declining quickly. Use Homes.com’s valuation tool to find values for your comps. Compare list prices with the value for each listing to get a sense for how much sellers in your market are pricing their homes above value. Divide the value by the list price to get the price to value ratio, which grows in sellers’ markets and shrinks in a buyers’ market as sellers respond to local demand.
Utilize Your Real Estate Agent
Real estate agents have access to market data not available to the public. Multiple listing services (MLS) are the metro-wide databases where agents place their listings and sites like Homes.com use to keep the listings current. Only about half of all MLSs release their monthly price, sales, and inventory data to the public but the information is available to their members. Real estate data analytics firms like CoreLogic and ATTOM Data Solutions also provide real estate professionals with local market data and analysis.
Even more valuable is the information and perspective on neighborhood market trends that a veteran agent brings to her clients. Successful agents regularly network with colleagues and competitors who might represent a buyer for their next listing. They often hear of homes that have yet to be listed or sales that are in process. Don’t hesitate to discuss your findings with your agent to learn more about the changing dynamics of your hyper-local market.