External Market Forces | The Group at RE/MAX First

THE MARKET, nothing has an effect on your home sale and sale price like everything going on around you that is OUT OF YOUR CONTROL.

Real estate pricing is a function of supply and demand. And supply is a function of how many people are interested in, and capable of, buying a home. This, in turn, is a function of employment rate (and within which category i.e. full-time, part-time, minimum wage, higher wages), population migration (population increasing, stagnant or decreasing), mortgage rates and ease of securing financing, and government incentives. In short, growth vs decline.

Biggest home on the block (regression/progression)

When it's your home, it's great to have the biggest, nicest home on the block, but not when your selling. The smaller properties will draw your home value down and pricing is largely a product of location (macro and micro). This is known as regression. Now on the other hand, when you have one of the smaller or HIGHER CALIBER homes on the block, then those homes, help elevate your relative value. (Progression)

More buyers than sellers (seller's market)

A seller's market is when the amount of buyers in your given MICRO market, are greater than normal as compared to the number of homes for sale in that same MICRO market. This number will vary by area to area, for example, in Calgary, a BALANCED market is a 3 months supply of homes. In other words, If all things remained equal, it would take 3 months for all the existing homes on the market to be bought by the existing buyers. If the number of listings decreases relative to the number of buyers, thus reducing this time for all the inventory to be bought, then that would take us into a seller's market. The reverse is true as well, If the number of buyers becomes lower and the number of sales (inventory) comes up then it will take longer to sell all the homes, and therefore make it more of a BUYERS market. This will vary from area to area. Keep in mind as well, when we speak about Micro markets, it really entails everything the BUYER will be looking at in comparison to the subject property. When they comparison shop, they will assign a certain value to all the different criteria.

More sellers than buyers (buyers market)

Economy – population migration, employment, interest rates

A booming city typically draws people to it. There tends to be more work and lower unemployment, better wages and more opportunities. The boom typically results in city improvements and more amenities, adding to the attraction of the city. The reverse can be said for an area in decline. The other point to remember is that all things that go up must also come down. If you are selling in an area that is in a boom, expect to get a higher return, lower or negative… the opposite. Keep in mind if you are selling in one of these markets, you are likely also buying in one of these markets. Don’t get overly caught up in making more on your home sale just to spend way more when you move UP on your purchase.

Chasing the market

When the asking price is set too high above a reasonable fair market value range making it attractive to comparison shoppers.

Competition, Market, micro niches ($, subtype)

Absorption rate / tied to supply and demand

So when we discussed the supply and demand, buyers market, seller's market and the area-specific typical time on market for all current homes to be absorbed, we were referring to something called the absorption rate. The absorption rate is one of the best indicators of the current market landscape in which your property sits. This will ultimately show whether you have MORE or LESS wiggle room on your ask price as it compares to the fair market value range.