Property values have not been declining lately, but how would you know if they were possibly going to decline? What metrics should you watch to be able to know if a real estate market is softening? Have a look below and let me know what you think. Anything else you would add?
Since the temperature of a real estate market often evolves over a period of time rather than an instant, it’s important to be able to look to the right metrics to help us interpret what the market is doing. Once we compare the metrics above along with sales and listings, we can get an idea of how the market is moving. Of course other metrics such as interest rates, cash investors and lending standards can definitely impact values too. As I always say, real estate is like a multi-layered cake because there are many layers to the market.
A Rumor About Appraisers & Listings: There is a rumor in the real estate community that appraisers cannot use listings to adjust for how the market has moved (whether up or down). This is definitely NOT true. Appraisers can make adjustments in reports based on listings. As we all know, today’s sales reflect the market from say 30-60 days ago when the sales got into contract, whereas reasonably-priced listings represent what the market is doing right now. Therefore if listings are priced higher, appraisers can make an upward Date of Sale adjustment to sales to reflect however listings are priced. Or if all listings are priced lower, appraisers can make a downward Date of Sale adjustment to sales to compensate for the market cooling off or declining.
Class I’m teaching for the Sacramento Business Journal: On May 21 I am co-teaching a class on blogging and using video for business for the Sacramento Business Journal. I know this is late notice, but I’d love to see you out at Drexel University tomorrow. The cost is $99, but that comes with a subscription to the SacBiz Journal, so the class pays for itself. Click the thumbnail for details or see this direct link.
Question: What other signs do you watch to know if the market is getting soft?