Mark Twain said “There are three kinds of lies: lies, damn lies, and statistics.” In general, statistics can be manipulated to tell you pretty much what you want to hear. But an agent needs to be aware of what is happening in the market place. If she keeps track of the average number of days on the market and the number of homes available, the agent can start to see trends in the market. Many agents don’t do this.
There are three types of markets: A Buyer’s Market, A Seller’s Market, and a Normal or Balanced Market. In general, the Normal/Balanced Market doesn’t exist. The market is always on its way either up or down, it doesn’t stop when it’s balanced.
A Buyer’s Market is where there are too many home on the market and too few buyers. This can be either the normal number of homes with fewer buyers looking or an abnormally high number of homes with the normal number of buyers looking. The way to tell the difference between the two is the number of completed transactions that are occurring. If the number of transactions is down, then the number of homes available are down.
A Seller’s Market is where there are too many buyers on the market and too few homes. Again, you can have the normal number of homes with more than the normal number of buyers, or fewer homes and the normal number of buyers. If the number of transactions are normal, you probably have the normal number of homes with more buyers.
In the early 2000s until 2006/2007, we experienced an amazing Seller’s Market. There were more buyers than homes even though there were more homes selling than normal. Obviously, the sellers decided to take advantage of the market and sell while the selling was good.
Unfortunately, the market was unsustainable. With the collapse of the sub-prime market, the market started to slow. Actually, no. The market was already slowing. There were signs going back to late 2004 that the market was slowing down. Days on market were increasing and the number of sales were decreasing. These signs continued unnoticed and not acknowledged by many real estate agents.
Next: The Real Estate Market, Part 2
© 2007 by Judy Kane
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