Several factors go into the impact on the health of a real estate market. There are currently several factors that are making it more challenging to purchase a home all across the country. Nearly every market in America has experienced a housing shortage and a significant increase in home prices.
The competition among more buyers than homes for sale is still a big factor in how challenging it is to purchase a home right now. In some markets, buyers have had to offer far above the list price for their offer to be entertained by the seller. Even though competition has been stiff, and prices have increased, the good news is that this is an out-of-the-ordinary occurrence that is not likely to happen again in one’s lifetime.
Before purchasing a home or selling one, you do want to be knowledgeable of the current status of the local real estate market in which you live. There are some things you can do to help you determine if your local housing market is healthy.
Here is a list of signs of positive growth you can use to help you determine the health of a real estate market.
First-time buyers are purchasing starter homes instead of renting
If a starter home is in high demand in an area, it is a great sign that the real estate market is on track. When a housing market is less than ideal many times first-time buyers looking for those starter homes or homes within the most affordable price range, will hold off for a little bit and choose the option to rent instead of purchasing a home just yet.
A strong housing market will see confident first-time buyers eager to purchase smaller affordable homes to get them into the world of ownership. Most often in a healthy market starter homes and attractive neighborhoods priced correctly will sell within a one-to-two-month time frame.
It is hard to purchase a home in foreclosure or short sale
The healthiest of housing markets have the fewest numbers of foreclosures and short sales available as well as other types of distressed properties. A market that is struggling may have an abundance of these types of homes listed for available purchase. This sometimes happens because homeowners are having a hard time finding a buyer and it leads to financial hardship while the house sits on the market longer.
Asking prices are increasing at a steady and strong pace
Home prices only see an increase with demand and as such unhealthy real estate markets do not see increases. The more demand there is for housing from buyers, the greater the amount of increase a list price will become. And the healthiest of market increases will happen at a moderate and steady pace, they will not decrease and they will not rapidly increase.
The unemployment rate is low
The unemployment rate in an area has a big impact on the real estate market’s health. In areas with low unemployment rates, there is money for buyers to put into the economy and spend on housing. Buyers with steady and stable employment are more comfortable putting money into the purchase of a home. When unemployment rates are high a consumer is going to look for ways to live as budget-friendly as possible and look into the option of renting for less financial risk.
Housing affordability stats are promising
The more people in an area that are able to afford to buy a home in an area, the healthier the housing market. A healthy housing market includes a good number of buyers able to purchase and afford a home. An unhealthy market will show that a limited selection of certain income earners is able to purchase a home in an area. One way to look up these stats is to use the National Association of Realtors housing affordability index.
List to sale ratio is at or above 100%
List to sale ratio is a tool used by real estate professionals to help determine if homes are selling for more or less than the listing price. This is calculated by dividing the actual sale price by the final list price of a home. The healthier the housing market, the higher this number will be above 100%.
Of course, the best way to help you determine if a housing market is healthy and worth selling a home, or investing in by purchasing a home, is to sit down with a trusted real estate professional.
For more information on purchasing a home in Saint George and surrounding areas please contact me anytime.