It would probably not surprise you to hear that the most frequent question I get when I am ‘out an about’ is some variation of “how is the market?” And you know what? It’s not always easy to provide a short, valuable answer because there are a lot of complexities and components involved.
Equities markets are pretty complex, too, but they have easy tools that consumers can look at and quickly understand how the market is performing. I’m referring of course to the Dow, S&P 500, and NASDAQ composite indices.
I think it’s time for the real-estate equivalent to the DOW and NASDAQ. So, I’ve created the Real Estate Market Meter to measure the 4 most typical questions:
-Is it a good time to sell?
-Is it a good time to buy?
-How are interest rates?
-How is affordability?
In general, my Market Meter ratings are driven by three main parts, in this order: 1.) Lots of market data and forecasts. 2.) Market chatter, such as showing activity and what I’m hearing in the office and in my networks from other agents. 3.) My experience and intuition. If you thought about it as a recipe, several data points and what I’m seeing and hearing “out there” are mixed together, and my experience and intuition acts as the binding agent and gives the final product it’s shape.
More specifically, The Seller’s Market Meter rating is derived from looking at current seller-to-buyer ratio data, which is readily available to real estate agents and is our industry’s main measure of supply/demand. I combine that with what I’m hearing in my networks and office, showing activity, and various industry forecasts. There are a lot of factors that are considered, including seasonality, to assign a 1-10 number that answers the question: just how good of a seller’s market is it today?
The Buyer’s Market Meter is not simply the inverse of the Seller’s Market Meter. In other words, if it’s a ‘9’ seller’s market that doesn’t mean it’s automatically a ‘1’ buyer’s market. That would only be the case if the only factor considered was supply/demand measures like the seller-to-buyer ratio. That is, of course, highly weighted in my analysis. But I’m also looking at the local economy, underlying demographic trends, pace of new construction and its ability to keep up with demand, interest rates and affordability, and many industry forecasts. The primary question is, if the analysis suggests that market is going to be tougher on buyers in the next few years then it is now, can you really call today’s buyer market a ‘1.’ In my estimation, you cannot.
In the end, the score on the Seller’s Market Meter and Buyer’s Market Meter are entirely mine and take a comprehensive view of the market based on the analytics I’ve described above, shaped by 18 years of experience. I believe they have tremendous value in providing a general understanding of the market, and they are a great starting point to a deeper conversation in truly understanding the real estate market and how you and your current or future property fits into it.
One of the coolest things about these two Meters is that they can be used to analyze specific micro-markets, and I’ll be doing that a lot through social media.
The Interest Rate Meter is pretty simple—I’m looking at various rates quoted by a number of lenders on a weekly basis. If I’m consistently seeing rates for 30—year conventional loans below 3.5% for fairly well-qualified buyers, I’m calling that a “10” / best rates ever.
-‘9’ is rates hovering in the 3.50-4.0 range.
-‘8’ is low-4s
-‘7’ is high 4s
-‘6’ is low-5s
-‘5’ is high-5s
-‘4’ historically rates in the 6s are pretty average, but in the past decade they are a ‘4’
-and so on…
The Affordability Meter is a measure of how easily the median household income can handle paying for a home priced at the market’s current median sale price.
I’m looking forward to publishing these market meters on a regular basis in future blogs and over social media. If you would like me to create one for a specific market, please contact me and I’ll do it!