Once you’re on the market, you’re going to be interested in the market. You’ll be reading and watching everything in sight. But information about the national market can be misleading, so you want to make sure you focus your attention on your local markets and on interest rates.
Few people are as interested in the real estate market as those in the process of buying or selling a home. If you’re actually in the market, you watch the market: you notice every “for sale” sign you pass on the street, you stop and watch every television news report about the market, and you read everything that gets published in the papers.
That’s all fine. It makes sense that you’re going to be interested in the market. But we want to caution you not to believe everything you read, not because the media has a bias or is presenting misinformation, but because the media presents the wrong information.
Essentially, the media is not a good resource for following the market. Most of the news that gets reported is really “old news” about homes that were sold months ago, in places far away. National home sales, which are what the media generally covers, make no difference to you. It doesn’t matter to a seller in Hudson Valley, Westchester, and Northern New Jersey what the national sales figures are, because real estate is intensely local. Of course, you’re going to read those stories anyway, but don’t let them get you anxious about the market.
That said, it is absolutely crucial that you stay on top of your market. Too many sellers, and agents, complete a comparative market analysis when they put the listing on the market, then never keep track of developments in that market. But the market is changing all the time, and you need to be aware of those changes and, if necessary, adjust your pricing and marketing strategies. Even in the short term, movements in the market can affect whether your home is well priced, even if you and your agent did a great job of pricing to the market when you listed it.
What can affect the price of your home?
•Competing homes that come on the market at significantly higher or lower prices to your listing price.
•Comparable homes that close at significantly higher or lower prices.
•Changes in interest rates.
•The strength of the economy, particularly consumer confidence and unemployment.
So given that following the market is important, what information should you be tracking?
1. The Market Action Update
The best resource for you in following the market is the information you’re going to get from your agent. Every Monday, you’re going to get an email called the “Market Action Update” that will detail activity involving new listings that come on the market, price changes, and closings of comparable properties. The update can very broad, pulling in sales from your local area that are not strictly comparable to yours, but that does give you a general sense of the local market, which is what you want to follow.
2. The Rand Quarterly Market Report
Also, you will get a Quarterly Market Report from your agent that will give you a much more comprehensive view of what is happening in your county and the full region, with written analysis concerning transactions, sales prices, days-on-market, listing discounts, and prices-per-square foot. This is the kind of local analysis that is helpful, as opposed to the national sales figures that are just distracting. We have been putting out the Quarterly Market Report for over eight years, and have data going back almost 10 years, so we have a very good sense of what is happening in our local markets.
3. Interest Rate Changes
Nothing will affect your home value more than changes in interest rates. If rates go up, your home becomes attractive to more buyers even at the same price. And if rates go down, your home becomes less affordable to the buyers who might be in your price range. See the chart on this page, which shows the impact of rising interest rates on buyer purchasing power. A buyer who can afford a $2,000 monthly mortgage payment can borrow $372,563 on a 30-year fixed rate loan at 5.0%, but as rates go up in half-point increments, her buying power goes down significantly.
4. Economic News
Thought it’s difficult to tell you what economic news to follow, the basic idea is that a good economy is good for housing. If consumers are confident, then buyers will be confident and more likely to pull the trigger. So although general economic news is not specifically related to real estate, it does have an impact.
Of course, throughout this process, the best resource for information about the market is your Better Homes and Gardens Rand Realty real estate agent. If you read something in the media that concerns you, or have a question about the market, reach out to get an answer. No one knows the local markets better than the agents who work in them.