The Biggest Mistake People Make When Speculating About the Real Estate Market

People are always talking about the real estate market but they are often doing so with an eye on the nation in general; that is a big mistake. It shouldn’t be a mystery, but maybe it will come as an “aha!” moment when I say: real estate is local. The real estate market in Austin, Texas may be a very different story than that of the market in Los Angeles, California and what’s up in Cali, my friends, is still yet entirely different than what is happening in Springfield, Missouri.

I’m always amused when I see articles and posts that scream generalities about market bubbles, inventory increases, inventory decreases, pricing fluctuations, and, well ad infinitum.

As a real estate investor, it is certainly important that you are aware of what is happening nationwide as a sort of general indicator of things to come, but it is imperative that you pay extra close attention to what is happening in the markets you are working in, which may very well include a number of different markets around the nation, but again, each one is different.

So what’s going on right now? Locally.

Covering every market in the nation would be far beyond the scope of this article, but here is a little bit of information I found on realtor.com.

An increasing number of markets are seeing improvements in for sale inventories, this year as compared to last; 25 markets showed a year over year increase, versus only seven in April of this year.

For Sale Inventory July 2013

(Sourced from realtor.com)

Top 5 MSAs with Greatest Year-Over-Year Inventory Increases

July 2013 vs. July 2012
Riverside-San Bernardino, Calif.	26.04%
Dayton-Springfield, Ohio	23.49%
Atlanta	17.85%
Sacramento, Calif.	16.66%
Santa Fe, N.M.	14.02%

California markets have been notoriously heading up the list of markets experiencing the biggest housing inventory decline during the first half of 2013; however, California has got a few new contenders for that spot. Honolulu, Hawaii; Naples, Florida; Denver, Colorado and Boston Massachusetts are all clamoring to get there and some believe that these pockets of improvement indicate that a general (yes, Nationwide) recovery process is well underway.

 

Top 5 MSAs with the Greatest Year-Over-Year Inventory Reductions

July 2013 vs. July 2012
Detroit, Mich.	-30.21%
Boston-Wrcstr-Lwrnce-Lowll-Brcktn, Mass.-N.H.(Mass.)	-28.91%
Denver	-25.10%
Honolulu	-23.78%
Naples, Fla.	-23.05%

 

“The recovery is entering a new phase where inventory shortfalls are no longer the driving force behind changes in housing prices in many markets. Larger inventories, especially in the hotter markets that experienced rapid price increases in the spring, are expanding buyers’ choices and helping to moderate price increases,” said Steve Berkowitz, CEO of Move, Inc. “This month’s report also underscores the uneven nature of the housing recovery and its dependence on the strength of the local economy.”

Remember, real estate is local. Yes, it may be an indicator of the story that is trending nationwide, but pay the most attention to what is happening in your own backyard; never invest based on generalities.