How you doing, real estate market? Signs that can help you gauge the pulse of the market

When it comes to real estate investment, the re-occurring mantra you often hear resounded is location location location.
The one principle that governs the real estate market in this regard is: timing timing timing…
Timing is remarkably important in the real estate industry. Whether you’re buying or selling, it’s crucial to pay attention to the current trends in your local real estate market so you can strike the best deal possible. After all, depending on how the market is trending, acting sooner or waiting it out a few months could make all the difference in how much you earn (or save).

Here are a few crucial signs to look out for when making your assessment of the market:

The Economy
A key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economic indicators such as the GDP, employment data, manufacturing activity, the prices of goods, etc. Broadly speaking, when the economy is sluggish, so is real estate. However, the cyclicality of the economy can have varying effects on different types of real estate. Thus, although you should be aware of the part of the cycle the economy is in, you should also be cognizant of the real estate property’s sensitivity to the economic cycle.

Dropping Inventory
Real estate prices are directly correlated to supply and demand. When inventory drops, I know prices are going to be driven up, as well as competition.

Low Unemployment and High Rent Growth
The market can also be looked at on a national level and determine areas recommended for investors to target based on factors such as supply, occupancy and rent growth. So, for instance, the market is much more optimistic when unemployment is low, occupancy consistently trends 93% and higher, and there is solid year-over-year rent growth that isn’t impacted by current or projected supply.
A few of the micro factors to look for include price, days on market and number of active units.

Demographics
Demographics are the data that describes the composition of a population, such as age, race, gender, income, migration patterns and population growth. These statistics are an often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades.
There are numerous ways that a demographic shift can affect the real estate market, but for an investor, some key questions to ask might be: i) How would this affect the demand for second homes in popular areas as more people start to retire? Or ii) How would this affect the demand for larger homes if incomes are smaller and the children have all moved out? These and other questions can help investors narrow down the type and location of potentially desirable real estate investments long before the trend has started.

Population Trends
If there are a lot of people moving into a town and the inventory is low, the prices are going to go up. If there is a lot of inventory, things should be moving quickly, but prices may not be increasing as rapidly.

The Energy of The Community
Look for the energy within the community and the look or feel of the market. The numbers and economic growth tell the story on paper. What can’t be told on paper or through data is the energy and people within a community.

Typically, when the job market recovers, excess inventory disappears (Excess inventory pushes down sales prices), median prices stop falling, closed businesses reopen, when there are more buyers in the market, and sellers buy move-up homes, then you know the market is looking good.