Real Estate Market definition

[Brandon Gamblin]

Not sure this is the correct forum for this type of question but I have three questions:

1. What defines a real estate market? Is it defined by the prices of houses sold? Is it the assessed value of the houses collectively? I need some clarification on a RE market.

2. What kind of resource can I attain to get a hold of real estate market information?

3. And what is the most relevant information that the typical investor needs concerning a market?

[Will Barnard]

Your market conditions are pricing (values of sold homes) and the direction it is going (price increases, price decreases, or flat pricing). You need to know this so that you can make the appropriate offer during each market cycle. Typically, there are 4 market cycles, buyers market I, buyers market II, sellers market I, and sellers market II. In a buyers market, prices are typically going down or sideways and there is a higher supply than demand. In a sellers market, it is the opposite. Assessed values have little to do with your market conditions, only sold inventory.

Your best resource is getting inventory levels which can be obtained from RE agents, title companies, etc. If you have 1000 homes for sale and 300 pending sales in your area this month and 3 months ago, you had 600 homes for sale and 250 pending, that tells you that supply is increasing and perhaps demand is decreasing. Knowing the supply and demand is crucial. Comparing inventory levels today to last quarter, last 6 months, last 12 months helps to decipher where your market is likely going next month.

Again, inventory levels are crucial, but so are the price increases/decreases from sold comps in your area. If you are flipping and your market is showing signs of increased inventory, you can expect prices to decline and thus, you need to make your offer based on what the price will be in 4-5 months from now when you are exiting and not what the pricing is today. In an increasing price market, you are safe in flipping.