Segment your marketplace by area
You need to acquire both a macro view of the whole place and micro view of selected neighborhood or school boundary areas. The broader view is helpful, but the close in view on specific market areas is essential when you are showing particular properties to clients.
The easiest way to create segmented market profiles is to track real estate performance using the existing segmented geographic regions as used by internet sites like magicbricks.com etc, because the real estate data is already aligned in that format. Or as an alternative, use the same segmentation featured in your newspaper’s real estate classified ads, as that aligns with the common market knowledge.
Determine available inventory levels
Know the level of competition for your buyer’s dollars by tracking the number of active listings on the market for sale. In most normal market places, about 65 to 70 percent inventory sells. However, these percentages climb higher (even to 90%) when inventory levels are low. These sale percentages are affected by the market’s inventory levels. In a marketplace that’s active or even volatile, dramatic changes can occur over a time span of 60 days.
Calculate the absorption rate
Absorption rate is how many months it takes for the currently available inventory to be purchased. By taking the current inventory level and dividing it by the number of pending properties, you can calculate how many months worth of inventory are for sale in your market area. The calculation provides a snapshot of current supply and demand.
Now ask yourself these questions
- Which market do you think is appreciating faster?
- Which market allows the seller greater control?
- In which market do homes spend fewer days for sale?
- In which market do buyers have the least control and the greatest need to meet seller demands in order to make the purchase?
- Which marketplace inspires the greatest seller greed?
- In which marketplace do the sellers put more pressure on agents to cut their commission rate?
If you know the numbers, you can know the future of your marketplace, unlike other agents who are just at best, guessing where the market is going. The trends are predetermined by your monthly analysis. Your research also helps clients trust you more.
Projecting trends on the horizon
Most real estate trends are a reaction to the law of supply and demand. As you project trends, study your market analysis for hints of changes in your market’s inventory. At the same time, study your region’s economic growth and stability for hints at what’s taking place to influence consumer demand. In general, a low inventory of homes leads to increased appreciation and more competition for “high demand” properties, which includes home that, are in superior condition and in superior locations. In a low inventory marketplace, sellers can often overreach in terms of pricing. When inventory levels are high, the competition for buyers slows appreciation. It also extends days on the market and can even drop sales prices due to lack of purchaser urgency to “buy now”.
