To understand your marketplace and its economic condition, compare current market activity with correlating statistics from the previous year.
Compare number of sales and total sales volume
Do the comparison both on a year to year and on a year to date basis. This comparison helps you to understand and forecast trends in your marketplace and answer the following questions
- Is the number of sales going up or down?
- Is total sales volume going up or down?
- Is the marketplace ahead of or behind the pace of sales from the previous year?
Compare the number of listings taken.
- Is the number of listings up or down? Fewer listings indicate a sellers’ market; many listings indicate a buyers’ market.
- Is the selection better for buyers than last year at this time?
- Is the inventory of homes for sales growing or shrinking as compared to this time a year ago?
Compare last year’s average sale price to this year’s average sales price. Determine your market’s average sale price by dividing total sales revenue by the number of houses actually sold. Knowing the average price helps you answer the following
- Is the average sale price going up or down? If a marketplace is healthy and vibrant, the average sale price is increasing.
- Is your marketplace appreciating or depreciating in value? For instance, if the average sale price has gone from 75 lacs to 1 crore, your marketplace is appreciating in value.
Be aware that the average sale price must be viewed on at least a quarterly basis. A one month change in this particular statistic a month doesn’t indicate a sustainable trend. This fact is especially true in small market areas.
How well is the inventory of homes aligned to demand?
If you have an appreciating marketplace, the inventory probably is lower than the demand for homes. In a flat or depreciating marketplace, the inventory or supply probably exceeds demand at this time.
To understand your marketplace and its economic condition, create a market trends analysis by comparing current market activity with correlating statistics from the previous year.