Reading The Market To Help You Know When To Buy

Dated: 11/30/2017

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By far, the most common question that real estate agents are asked is, "How's the market?"

Well, that's a complicated question because there's so many ways to answer it.

"Commercial or residential? In Orange County? In Costa Mesa? In Laguna Niguel? In your neighborhood? Statewide? Nationally?"

Maybe I'm just being overly analytical, but real estate is chock-full of nuances. There are markets and sub-markets, and then there are sub-markets within sub-markets.

Again, call me overly analytical, but it's true. Orange County alone is an incredibly dynamic marketplace with ultra-high end homes, mid-ranged homes, and entry-level homes.

As a home buyer, it's important to know what the market is like for the type of home you want to purchase for three reasons:

  1. So you have realistic expectations of the level of competition 

  2. You can spot a great deal when one pops up

  3. You can spot trends that may affect your target date (or decision) to buy a home

In this post, I'm going to expound on point number 3 and how you can get set up to read the market in that regard. This will require you getting set up with automatic updates directly from the MLS.

Establishing Your Basic Home Criteria

The first step is to establish the basic criteria of what you're looking for in a home. A few of the basic requirements would be:

  • City

  • Price Range

  • Number of Bedrooms and Bathrooms

  • Square Footage

The goal is to arrive at a grand total of 20-30 listings. Any less than 20 and you won't have enough data to get an accurate read on the market, and any more than 30 will be too much to sort through. 

Even if you have to stray off of some of your basic requirements to get within that 20-30 range, such as wanting a home with a swimming pool for example, that's OK. You just want to be able to have enough data to get an accurate picture of what's going on in the market for those general types of homes.

Choose Your Frequency Of New Listing Alerts Depending On Your Target Date

Depending on how soon you are planning to buy your home, you'll want to set your notifications to update you monthly, weekly, or daily. Here's how often we would typically update our clients with new listings:

  • Monthly = More Than 90 Days Away From Desired Close of Escrow Date

  • Weekly = Between 60 and 90 Days Away From Desired Close of Escrow Date

  • Daily = Less Than 60 Days Away From Desired Close of Escrow Date

Of course, these can always be adjusted depending on your personal preference.

Track Recent Closings Matching Your Criteria

In addition to new listings, you can also elect to receive alerts of recent closings that match your criteria. There's a few key pieces of information you'll want to track using these alerts:

  • Final Sales Price - Also known as the comps. You'll scrutinize this data more carefully just before you submit an offer, but it's important to familiarize yourself with beforehand.

  • Final Sales Price vs. List Price - How far apart were the asking price and the final sales price? This will give you an indication of the market and also seller's expectations versus reality.

  • Days On Market - Days on market is a big indicator of how hot the market is. Obviously, the fewer days on market, the higher the demand and the greater the competition.

Track Sales Prices To Determine If You Should Adjust Your Target Date (Or Buy At All)

Tracking this information can be incredible useful to determine if you should move your target date up or back. If you see a rapid spike in sales prices, you may consider moving up your target date to avoid paying a much higher price. If you spot a trend of decreasing prices, you may choose to hold off until the market levels off before buying.

Don't Worry - You Don't Have To Make Sense Of All This Data By Yourself

You might be finishing this article and thinking to yourself, "How in the world am I supposed to track all this data?" Fortunately, you don't need to, nor should you, do it all yourself. Once your agent gets you set up with your customized searches, he or she should be working closely to help you make sense of market data and spotting trends.

Blog author image

Andrew Ramirez

Andrew Ramirez was born and raised in Orange County, living in Irvine and Tustin as a child before moving to Costa Mesa in 2001. He lived there for twelve years before marrying his high school sweethe....

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