5 Ways to Determine What the Real Estate Market Looks Like
When homeowners want to sell their house as fast as possible, their first question is, “What does the real estate market look like right now?”
Before you put your home up for sale, you need to know what’s happening in the local market, as well as in the surrounding area. A top-producing realtor can share many market indicators that help explain the condition of the local real estate market.
Check out these 5 indicators that tell you how well your house will sell.
1. Average days houses remain on the market
The average number of days any house remains on the market demonstrates how quickly homes are selling. Although the average is constantly changing, real estate professionals consider 6 months on the market has “neutral,” meaning it favors neither buyers nor sellers. If the market favors buyers, the average might be a month, and if the market favors sellers (aka, when the market is slow), the average might be 9 months.
2. Market absorption rates
The market absorption rate is represented by this formula:
Number of sales in a month
Number of houses available for sale
For example, if there are 100 houses for sale, and 10 sell in a single month, the equation reads 10/100 = a market absorption rate of 10%. Typically, a market absorption rate of 20% is considered good for sellers. Low rates indicate the supply of homes is greater than the demand, which favors buyers.
3. Number of closed transactions
You can also look at the number of closed transactions for a given month, year after year. The answer will tell you what month is the best time to list your home for sale, based on historical trends.
4. Average sale prices
You need to know a reasonable price range for your home, so you’ll need to determine it’s value. Make a list of the assets of your home, such as the number of bathrooms and bedrooms, the number of acreage, the average square feet, and the type of home (condominium, residential, rental, etc.), and then find similar homes already listed on the market. Compare prices and determine how much you could potentially list your home.
5. Average list price to sale price ratios
The ratio of average list price to sale price is represented as a percentage. You simply divide the sale price (what the home actually sells for when all transactions are complete) by the latest listed price. Since homes usually don’t sell for more than the list price, the percentage will be below 100%. Understanding this ratio will help homeowners find a reasonable price for their home.
These 5 indicators will help you determine what the real estate market looks like in your area. You can also find local real estate publications that contain current home listings. The local Multiple Listing Service is a valuable tool to help you find everything related to home-buying, including new and retail homes, mortgage rates, acreage lots, Q&As, and even real estate classes.
If you have a real estate agent, he/she will provide you with great insight into market conditions and other relevant factors.