25 Facts About the Real Estate Market That Could Change How You Buy and Sell

The real estate market is known to offer investors the potential for high returns in the long term. Different factors affect the market conditions, which can determine how high your returns are when selling or how low you can go when buying. Here are 25 facts about the real estate market that could change how you buy and sell:

The Market is Cyclical

The real estate market often operates in periods of expansion, peak, contraction, and recovery. These periods can provide different opportunities for buyers and sellers, which can either help increase selling prices for sellers or reduce home prices for buyers. Understanding how these cycles work and what signs indicate which period of the market is current cycle can help you time your transactions to maximize your benefits and goals.

It Is All About Location

A common phrase people hear when discussing real estate is “location, location, location,” emphasizing how important the location of a property can be for anyone looking to enter the real estate market. Properties near schools, amenities, and job hubs tend to have much higher value than farther away properties. The location has proven to be even more important than the size of the property, having a more significant impact on the value of the property and its location.

Mortgage Rates Can Drive Demand

Mortgage rates can have an important influence on how buyers approach the market. Rising mortgage rates can deter buyers because they mean higher monthly costs, which can lead to a cooling period in the market. On the other hand, low mortgage rates can help to make real estate much more affordable, drive demand, and even lead to better appreciation values. Paying attention to the current state of the mortgage rates can help you determine whether it would be a good time to buy or sell.

Real Estate Acts as a Hedge Against Inflation

The value of properties tends to rise with inflation, preserving purchasing power, which can be a great way of ensuring you have assets that can continue to appreciate even with inflation. Many investors prefer getting into real estate markets, especially during inflationary periods, because the cost of rent and properties can also increase, ensuring a steady stream of high returns. Once rental costs rise, they rarely go back down, presenting a steady return increase.

Cash Buyers Hold Power

In competitive real estate markets, sellers often prefer selling to cash buyers instead of those who require external financing to afford the property. Cash offers can lead to much faster closings on sale deals and offer fewer contingencies, which can benefit the sellers involved. If you are looking to enter a competitive market, you may have to prepare yourself to put up reasonable offers to outbid cash buyers.

Timing Can Save Thousands

Having a keen understanding of how the market fluctuates with time can help you save thousands of dollars. The real estate market is also often influenced by seasonal trends, where spring and summer seasons include higher prices and more competition. At the same time, winter can offer better deals for buyers because of the reduced buyer activity. Timing when you sell or buy according to these seasonal trends can determine how much you gain while selling or save while buying.

Supply Drives Prices

Another important factor determining the prices in the real estate market is the supply availability. Lower inventory can drive up prices, increasing competition among buyers. On the other hand, oversupply can put downward pressure on prices, signaling a better market for buyers. Before entering the market, whether buying or selling, you can study the available inventory to determine how well the market will act in your favor.

Real Estate is Localized

While national trends can help you understand what real estate market conditions may be like, they may not actually signify the markets of a specific area, which can sometimes be misleading. Suppose you are considering getting into the market. In that case, it is recommended to focus on more local trends like local economies, local population growth, and local zoning laws, which can better indicate what the market in the area you want to buy or sell may look like.

Staging Can Increase Sale Prices

A great way to increase the sale prices of a property is by staging it and showing potential buyers what the possibilities of the home can offer. If done well, staging can help boost the perceived value of a home and can often help the home be sold faster. Providing buyers with a visualization of what the home can offer and how they can maximize the space available to them can increase the home’s visual appeal, helping it sell faster and at higher prices.

Technology is Transforming Real Estate

Adopting technological solutions and tools has helped transform the real estate market. Many individuals entering the market have embraced visual tours, AI-driven pricing tools, and online marketplaces, which can help provide a seamless buying and selling experience. These tools also help to make transactions faster and much more transparent while also having the potential to increase competition. Leveraging these tools can be beneficial for both buyers and sellers.

Renting and Buying Can Offer Different Advantages

Buying a home can offer many more benefits than renting, especially in the long term. However, this can be highly dependent on the nature of the market. In some markets, renting may be much more cost-effective than buying, even in the long run, especially with rising property prices. Before buying a home, buyers should evaluate long-term plans, monthly costs, and the potential for equity growth, which can help to determine how beneficial buying would be.

House Flipping Has Its Risks

Many individuals have bought homes at lower costs, renovating and selling them for higher returns. While house flipping can offer high returns, it can come with various issues, including overestimating the resale value or finding unexpected renovation costs. Market downturns can leave many flipped properties unsellable, leading to high losses for house flippers.

Foreign Investments Influence Markets

Foreign investments can be a great indication of a growing economy. Most foreign investors target high-demand areas that can drive up property prices and reduce inventory for local buyers because these investors tend to attract population growth. Some cities worldwide have imposed regulations to control the impact of international investments on real estate markets. Looking at areas that attract foreign investments can be beneficial if you want to enter a housing market with a high valuation in the long run.

Millennials Are Dominating the Market

Millennials are now the largest group of homebuyers. Most successful real estate markets offer homes with features that these individuals look for, including energy efficiency and smart home technology features. Sellers who cater to this generation of buyers and the trends that emerge from their demand see much quicker sales because the homes tend to offer designs that fit into their preferences.

Renovations Don’t Always Pay Off

If you want to renovate your home to drive up the selling prices, focusing on improvements that offer a broad appeal rather than those that may only appeal to a small group is essential. Renovations and upgrades to kitchens and bathrooms are some of the best ways to see added value to your property, while taking on projects that include adding luxury pools may not be as valuable as you may imagine. It is important to remember that not all renovation can add value to the property.

Property Taxes Can Hinder Sales

A significant factor that must be considered because it can determine how much you pay for the property is the property taxes. High property taxes tend to deter buyers because they can lower the affordability of a property. Home buyers can research the local tax rates while comparing different properties because these rates influence the monthly costs of the property. Paying attention to this factor is essential because the taxes can add thousands to your overall costs.

Home Prices Rarely Decline in the Long Term

The general trend with real estate prices is that they rarely decline long-term. While these prices may see a short dip, they generally continue appreciating as more time passes. Buying a home during an economic downturn can offer more opportunities for long-term gains because the markets may dip in the short term but significantly recover over time. It is important to study the market trends to determine whether current prices are good for buying before making any decisions.

Urban Flight is Reshaping Markets

The pandemic led to more individuals looking to leave urban centers and move to more suburban and rural areas. This has led to increased demand for suburban and rural properties, driven by this shift in location preferences among families, remote workers, and other individuals. This shift has redefined property values because of the rising demand for properties outside of urban centers, leading to growing real estate opportunities that offer more potential in suburban and rural areas.

Real Estate Agents Can Result in Better Deals

Taking on the expert help of real estate agents with insightful knowledge of the market, coupled with excellent negotiation skills and pricing expertise, can play an essential role in the cost of selling or buying a property. The guidance these individuals offer can result in lower prices for buyers and higher sale prices for sellers because they are trained to help their clients find a deal that works best for them.

Zoning Laws Tend to Limit Potential

The local zoning laws in the area whose real estate market you want to enter define how properties are used and modified. It is essential to keep an eye on these laws if you are looking to buy a property because they determine what kind of renovations are allowed, whether renting out the property is allowed, etc. Before buying a property, look at what the zoning laws say to ensure that your plans align with the restrictions these laws tend to put in place.

First Impressions Matter

A property’s first impression on a buyer can be very influential in the decisions these buyers will likely make. If you want to increase the chances of a property selling, you can add simple upgrades, which include light landscaping or even a fresh coat of paint, as these actions can make the property seem more appealing. This can attract more offers and even drive up sale prices, which can be significant to sellers.

Real Estate is a Long-term Investment

Many people consider real estate investments because of the promise of high returns that properties offer, unlike other investment assets. However, to get the best possible returns out of your investment, it is important to have a long-term view because real estate helps to slowly build wealth through appreciation and equity growth, which tend to take several years. While real estate can offer short-term gains, they are less common and occur in rapidly appreciating markets.

Changes in Interest Rates Impact Buying Power

The slightest change in mortgage interest rates can greatly impact buyers’ buying power because an increase of just 1% can lead to much higher mortgage bills, while a decrease in the same amount can make purchasing a home more affordable. Changes in these rates affect the affordability of real estate while also affecting demand across price points. Buyers must remember to keep an eye on the changing interest rates to ensure that they enter the market while prices are more affordable.

Smart Home Features Attract Buyers

Changing preferences in what homebuyers look for in the homes they want to live in impacts the real estate market. With the popularity of smart home technologies like automated lighting or security systems, more buyers are looking to find homes that offer these smart features to contribute to their convenience and efficiency. Sellers can consider adding these features to homes as they can increase selling prices and even help homes sell faster.

Climate Change Influences Value

An important factor influencing a property’s value is how likely it is to be impacted by climate change. Properties in areas prone to flooding, wildfires, or any extreme weather conditions have the potential to see declining values, while homes built with features that offer climate resilience are becoming much more desirable and can sell for higher prices. When buying or selling a property, consider its area and expected weather conditions.

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