Your effectiveness as a real estate professional will be influenced by the resources you consult and the indicators you use to spot and react to local trends. The more predictive the indicators, the better decisions you will be able to make to guide and grow your business as the cycles of the market ebb and flow.
If you rely primarily on mainstream media for insights into the housing market, you’ll be working with incomplete information. The stories that grace the covers of magazines, like Time, Fortune, Money & Newsweek, tell the story the typical customer wants to hear, one based on current housing prices. Unfortunately for the investment minded, current housing prices are a lagging indicator.
Lagging indicators don’t change direction until two or three quarters after the rest of the economy. As you can well imagine, housing prices provide very little predictive value. Especially when you keep in mind that compared to financial markets, real estate markets involve longer boom and bust periods, it’s obvious that you’ll need to be watching for trends ahead to be a superstar.
Research in this area can be time consuming. You’ll need to track and monitor the fundamentals of real estate within your area for relative health in order to identify trends.
Things such as demand, supply and affordability are key indicators that you’ll need in order to effectively help with your decision making. Accurate tracking and analysis can provide up to a two year leading indicator for home price appreciation or depreciation.
A rising trend can indicate appreciation on the horizon, while a declining trend may be a precursor to depreciating prices.
Your long term plans will determine what these predictors will mean for your business. Typically, investing when the trends are rising and divesting when they’re falling are the expected routes, but your business strategy may call for different decisions.
The important thing is to have solid information you can rely on to guide you. There are research and consulting firms with services and tools that can make the process easier. Instead of monitoring the market for yourself, you can utilize compiled information for the same effect.
Whether you conduct your research on your own or outsource the task, digging beyond the headlines will benefit your business. Any special knowledge that you can develop about your marketplace will set you apart from your competitors and provide you with a
unique edge.