Understanding Your Market - How To Get Started

[James Chung]

Hi all,

Like a fool, I posted this originally in the PRO-only area, where the audience is obviously a lot smaller. I'd appreciate a 'pro's' feedback on the following please:

1) What defines a hot vs cold market, or buyer vs seller's market? Is this relative to the buyer vs seller? Is this essentially parallel with inventory? In other words, does high inventory mean great market for buyer's while low inventory means great for sellers?

2) How does one go about (besides asking/trusting a real estate agent) determining whether they are currently investing/selling in a low vs high inventory market?

3) What are some obvious indicators of market trends in general? Are there some static things one can look out for to predict what's coming next? Is it about having the know-how to REACT, or can things be done to always be ahead of the curve and PROACTIVELY know when to hold vs sell?

4) What is the best way to transition into foreign territory once someone is comfortable with their market and ready to scale outside, say, their region of primary residence?

5) I don't know what I don't know...what else should I be asking/knowing to optimize my performance in any given market? 

[Dawn Brenengen]

1. Yes, low inventory means a seller's market.  Simple supply and demand.

2. Keep an eye on homes that are just listed and see how quickly they go under contract.  If it's just a few days or weeks, you are probably in a seller's market.  You can have an agent pull absorption rates for you.

3. It's tough to time the market, but RE is cyclical.  If we are in a seller's market for a long period of time, then it's only natural there will be a correction at some point.  Also, once you start seeing people qualifying for loans with no money, that's a good indicator to get out.

4. Boots on the ground.  Have agents, property managers, contractors, etc who can look after your property for you.

5. You're just going to have to live and learn.  The nice thing about RE is that it rarely goes to zero.  It's hard to make a mistake and lose your whole investment like you can in the stock market.  Don't worry so much about optimizing.  You will analyze everything to death and never jump in.